x Abu Dhabi, UAEFriday 21 July 2017

Big boys return to UAE's markets

The UAE's strategy to attract long-term institutional investors appears to be paying off, as pension funds and insurance companies replace the speculative "hot money" of the pre-crisis years.

The Dubai Financial Market General Index is the third-best performing stock benchmark in the world this year. Pawan Singh / The National
The Dubai Financial Market General Index is the third-best performing stock benchmark in the world this year. Pawan Singh / The National

Big institutional investors are returning to the UAE's markets, propelling the Dubai and Abu Dhabi stock exchanges into the top four performing measures worldwide.

The arrival of seasoned institutional buyers, who are typically long-term investors, is causing some traders to speculate that an upgrade to MSCI emerging market status could finally become reality this year, as a sign that the UAE's financial markets are at last ready for prime-time investors.

Greater numbers of institutional investors have been pursued for years by exchange officials to give more stability to local markets.

With the UAE's markets now at levels not seen since the Dubai World crisis in 2009, fears of any sudden problems still linger, however.

But institutional investors were being drawn by the improved prospects for the local economy, said Ahmed Beydoun, the head of equity capital markets at Deutsche Bank, among the banks with the biggest distribution networks.

"Interest in the UAE markets has definitely gathered pace throughout the year from institutional investors, this interest should continue if the economic backdrop continues to improve."

The Dubai Financial Market (DFM) General Index is the third-best performing stock benchmark in the world this year, having risen 27.9 per cent since January.

The Abu Dhabi Securities Exchange General Index is the fourth-biggest gainer worldwide with a rise of 24.9 per cent. Both are within bull markets for the year, defined as an increase of 20 per cent or more during a given period of time. Not only that, the dividends on offer to investors across the two indexes are on average between 4 and 5 per cent, sweetening the gains on offer.

Though the UAE is not part of the biggest emerging market index, that was little impediment for institutional investors seeking to make big returns, said Ross Teverson, the investment director for global emerging market equities at Standard Life Investments.

"Although UAE and Qatar are not currently in the MSCI Emerging Markets benchmark, we do look to both markets for investment opportunities," he said. "However, signs of recovery in the Dubai property market are encouraging for the economy and market as a whole and that the outlook for Qatar economic growth remains robust."

The change in the type of investor was significant, said Arindam Das, the head of HSBC Securities Services, the region's biggest custodian and settlement provider.

"Now it's more long-term investors - mutual funds, pension funds, and insurance companies."

 

ghunter@thenational.ae