Fund managers are hoping the elevation of UAE bourses to emerging markets status will support a Ramadan rally.
MSCI, the international index compiler, yesterday shortlisted eight publicly listed companies, including heavyweights Abu Dhabi Commercial Bank, Aldar, First Gulf Bank, National Bank of Abu Dhabi and DP World, that are expected to enjoy generous weightings on the MSCI UAE Index that will be reclassified from "frontier markets" to "emerging markets" on June 2.
Investors typically position their portfolios ahead of second-quarter results and a so-called "Ramadan rally", which traditionally occurs towards the end of the holy month every year.
"The MSCI announcement could play a big role in reviving interest in the market creating a catalyst that could support second quarter results resulting in a conclusion of the Ramadan rally," said Marwan Shurrab, a fund manager at Vision Investments. He is positioned into defensive high yield securities with increased exposure to the MSCI expected constituents.
MSCI upgraded the UAE and Qatar to emerging markets status last June in a move that will put the two Arabian Gulf states alongside Brazil, Russia, and China.
HSBC estimates that some US$800 million in passive investments will be funnelled into the UAE and Qatar automatically as a result of the countries becoming included in the index.
On the Abu Dhabi Securities Exchange, the property developer Aldar has a 12.9 per cent provisional closing weight on the MSCI UAE Index. National Bank of Abu Dhabi, the biggest lender in the country by market capitalisation, has an 11.6 per cent weighting.
Abu Dhabi Commercial Bank, a commercial lender, has an 9.95 per cent weighting. First Gulf Bank has a 9.3 per cent weighting.
In the neighbouring emirate, the Dubai-based ports operator DP World has a 16 per cent weighting. Emaar Properties has a 28.1 per cent weighting, and Arabtec with a 5.73 per cent weighting. Dubai Financial Market has a 6.34 per cent weighting.
"This summer is different than previous summers," said Tariq Qaqish, the head of asset management at Al Mal Capital in Dubai. "Trading volumes are high and lots of momentum from second-quarter earnings to the Expo 2020 announcement in November, where Dubai is among the bidders for the event."
Shares listed on the Dubai Financial Market and Nasdaq Dubai rose yesterday, including most of those that were included on MSCI's provisional UAE index.
Shares of Emaar Properties, the region's biggest developer, gained 1.8 per cent to close at Dh5.57 each. Dubai Financial Market Company, the listed shares of the emirate's bourse, ended 1 per cent higher to Dh1.86. Arabtec Holding, the UAE's biggest contractor, was unchanged at Dh2.13. DP World, the world's third biggest ports operator, advanced 2.4 per cent to US$15.65.
Shares of Aldar, the capital's biggest property developer, added 0.8 per cent to close at Dh2.35 on the Abu Dhabi Securities Exchange. First Gulf Bank rose 1.4 per cent to Dh17.15. Abu Dhabi Commercial Bank was unchanged at Dh5.15.