The UAE stock markets are in the midst of a long-term, multi-year upward trend, and the bullish performance thus far signals a revival that is only in its early stages, according to Daman Investments, the leading Dubai-based investment management company.
Unveiling the 2013 edition of its annual market report to members of the press at a media roundtable, Daman Investments top management officials led by Managing Director Mr. Shehab Gargash, ran through an analysis of both macro and fundamental factors that underpin movements seen in the UAE financial markets.
The research found that nine of the 11 key factors identified by Daman fall into positive territory, thereby leading it to conclude that the UAE bourses, the Dubai Financial Market (DFM) and the Abu Dhabi Securities Exchange (ADX) , have an optimistic outlook. The findings essentially indicate that since the rally seen in the UAE exchanges only signifies the beginning of a multi-year bullish cycle, it is not yet too late to enter the market as significant returns lay ahead for investors with longer term investment horizons.
The report looked in detail at the key sectors driving the UAE economy such as trade, tourism and transport. It also noted the strong resurgence of the Dubai Real Estate market. Additionally, it pointed out the increase in bank lending activity this year and the strong capital positions of UAE banks.
From a bottom up perspective looking at earnings and valuations, UAE corporates look to be in good health. In light of these findings, Daman is looking for double-digit earnings growth for the market as a whole in 2013. Despite the positive outlook, however, valuations still remain below their long-term trend.
Daman Investments identified three key catalysts that will give the market further impetus. Firstly, the market needs to switch from secondary activities/offerings such as share buybacks and rights issues to primary market activities like IPOs. Secondly, bank financing must be made available for active stock market portfolios and finally, foreign institutional participation in UAE bourses needs to be increased. This would provide a continuation of much-needed liquidity to the markets and serve to highlight the inherent growth potential of UAE markets.