UAE and Qatar stocks rise to recover mid-May losses

28 May 2014

Investors took advantage of cheaper buying opportunities

Stock markets in Abu Dhabi and Qatar recovered their losses after heavy sell-offs in the middle of May. The exchanges rose 3.5 and 3.8 per cent respectively between 25 and 27 May, bringing their month-to-date gains to 6.5 and 1.1 per cent.

Dubai Financial Market recovered some of its losses, increasing 3 per cent between 25 and 27 May, though its monthly figure was still down 1 per cent.

Investors took advantage of cheaper buying opportunities to enter the markets ahead of their MSCI upgrade to emerging markets status, which is expected to attract $500m to $1bn from passive, index-tracking funds. These investors will be reallocating their portfolios to include the UAE and Qatar over the next six months.

Qatar’s index jumped upon news that authorities have increased stocks’ foreign ownership limit significantly, as well as introduce new trading mechanisms and products such as exchange-traded funds.

Among the top gainers are Mesaieed Petrochemical Holding Company (up 255 per cent over the past five months), Masraf Al-Rayan (93 per cent), Emirates NBD (53 per cent), Ezdan Holding Group (46 per cent), and Emaar Properties (46 per cent).

The exchanges could remain volatile as some investors look to book profits on their stocks that have risen 19 per cent (Abu Dhabi), 30 per cent (Qatar) and 49 (Dubai) per cent year-to-date. With a slower summer period around the corner, the ‘sell in May and go away’ trend could prompt further sell-offs following the MSCI upgrade on 1 June.

Some experts argue that stocks have become too expensive compared to their current worth and will take years to live up to their factored in cost. But others believe that many investors are waiting on the sidelines, eager to gain exposure to a dollar-linked safe haven as more volatile emerging markets experience currency depreciation.

While prices have not yet reached the same levels as during 2008’s peak, they have gone up significantly since the start of 2013. Abu Dhabi has a price-to-earnings ratio of 14.6, while Qatar and Dubai are slightly higher with ratios of 16.4 and 17.6.

Elsewhere in the region, stock markets registered less sharp movements. The Saudi Stock Exchange (Tadawul), the region’s largest and most liquid market, recorded modest monthly rise of 2.6 per cent.

Bahrain rose 2 per cent, while Kuwait dropped 2 per cent and Oman remained flat.

Egypt’s steady rise slowed down over the past two weeks, though it is still up 5.8 per cent month-to-date as the country’s citizens vote for a president. If Field Marshall Abdul Fattah al-Sisi wins the election, that is expected to strengthen the country’s ties with GCC countries and help the economy get back on track.

A MEED Subscription...

Subscribe or upgrade your current MEED.com package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.