UAE stock markets ended their best quarter in the past 12 months yesterday. The Dubai Financial Market General Index has rallied 15.2 per cent in the past three months, before ending on a sour note yesterday and closing down 1.1 per cent at 1,683.69. The Abu Dhabi Securities Market General Index rose 6.33 per cent during the quarter, also topping the three previous quarters.
The recovery in the past month occurred due to several factors, including the end of Ramadan, the inclusion of the UAE in the FTSE Global Equity Index and Dubai World's settlement with most of its lenders. Mutual funds with cash on hand found plenty of cheap stock available, fuelling the recovery. "From a valuation point of view these markets were the cheapest in the region and maybe the world," said Giyas Gokkent, the chief economist at National Bank of Abu Dhabi.
Some traders believe the quarter's gains, the largest since the third quarter of last year, could persist during the coming months. "We expect (the fourth quarter) to be the best quarter ever, at least since 2009," said Alfred Fayek, the head of MENA equity sales at EFG-Hermes. "I think this quarter we'll have a big run or at least a very significant increase in trading volumes," he said. Mr Gokkent was less bullish. "There's a reason to think [markets] might not continue to go up, because what we've seen has been a rapid increase in a relatively short time span. I'd anticipate a pullback," he said.
But households throughout the UAE should receive the benefits of stock market gains and boost consumption, he said. "As liquidity in the system improves, that will feed into credit growth and that's linked to non-oil sector activity," Mr Gokkent said. Other analysts agreed that a degree of scepticism was warranted. "The outlook is positive in the medium term," said Saad al Chalabi, an institutional investor at AlRamz Securities. "Oversubscription of the Dubai bond shows that there's still some faith in the system."
But he warned the rally bore some resemblances to the last big rally in the third quarter of last year. The bull market that began that quarter was halted when details began to surface about Dubai World's debts. ghunter@thenational.ae
