Gulf investors are more upbeat about business prospects this year and expect a year-end rally in UAE stocks, according to the latest survey by Shuaa Capital. Investor confidence climbed this month to 127.3 from August's reading of 126.3 after improving for the past six months, with only one month-on-month drop in April, the regional investment bank said yesterday.
"Until recently people kept asking 'when is the worst over'?" said Jeffrey Singer, the chief executive of NASDAQ Dubai, one of the emirate's two stock exchanges. "But now I hear them ask 'how are things?' instead." The positive sentiment was most pronounced in the six-month outlook for the GCC. Only one in 10 investors have a negative outlook, the report said. Two in three investors said they would invest in the region in the next six months.
The survey is based on 750 international and 750 investors in the region. "In the past, uncertainty has been the main driver for investor confidence. But now professional investors seem to stay here longer. While there were lots of hedge funds in 2007, we are seeing less risky investor types now," said Oliver Schutzmann, a Shuaa Capital spokesman. Confidence in current economic conditions rose strongest in Bahrain and the UAE, with gains of 19.6 points to 76.5 and 11.7 points to 90.2 respectively. A reading above 100 is positive.
However, investors remain negative on the current economic conditions in the UAE, the survey indicates. About half of the respondents expect a "year-end rally" on the Abu Dhabi Securites Exchange and the Dubai Financial Market. Almost half of the respondents consider Abu Dhabi stocks undervalued. The FTSE NASDAQ Dubai index, which tracks the UAE's 20 most liquid stocks, is up 76 per cent so far this year. Meanwhile, the MSCI regional index is up 25 per cent.
"It looks like the UAE is outpacing the rest of the region. But then you may argue that the UAE was harder hit," said Mr Singer. Mr Singer said global trading volumes had picked up in the past two months. "Investors are getting back into the markets. People are proceeding cautiously, but are more optimistic than six months ago. Some progress is being made." Two factors are still holding back optimism, Mr Singer said. The large number of unemployed in the US and Europe are a "huge drag on future spending" and "the sheer size of debt of the US and Europe is causing concerns over inflation".