Dubai and Abu Dhabi stock market indexes are among the top four performers in the world so far this year. The showing in January builds on the stellar performance of 2013 when UAE equities soared amid an economic rebound.
Sheltered from the massive sell-off in emerging market equities in the past week, asset managers are still upbeat about the prospects of UAE companies this year because of the bright economic outlook. There is concern, however, that prices may have outpaced the underlying fundamentals of some companies and that a mild sell-off may come soon.
“The meltdown has been led by countries that have large current account deficits and where the currency was wobbly,” said Sachin Mohindra, a portfolio manager at Abu Dhabi-based Invest AD. “The GCC has a current account surplus so we don’t have the same problem as some of these emerging market countries. Having said all that, I also feel that the pace of the rally has been a bit too aggressive and I also feel that a correction would be healthy.
“I don’t expect the correction to be deep and structural but any correction would be healthy and benefit the long-term uptrend in the market.”
Dubai’s main stock index, the Dubai Financial Market General Index, has gained 12 per cent so far this year, the best performer among 94 global stock indexes tracked by Bloomberg, a provider of financial data and news.
Abu Dhabi’s measure, the ADX General Index, which rose 8.9 per cent, is ranked fourth best this year behind the Bulgarian and Vietnamese benchmarks, according to the data.
Last year Dubai’s index more than doubled while the Abu Dhabi gauge advanced 63 per cent.
Mr Mohindra noted that sentiment in the UAE has been kept positive due to a spate of strong bank results. The fact too that markets here are dominated by locals meant there wasn’t much flight from these assets when there was a meltdown in global equities.
Among the top 10 performing stocks on the UAE exchanges so far this year are Abu Dhabi Ship Building, which has rallied 81 per cent on market speculation that the emirate of Abu Dhabi will order more ships.
Arabtec Holding, a construction company that was a laggard last year, gained 49 per cent for the month.
Waha Capital, the Abu Dhabi investment firm that owns a stake in the airplane leasing company AerCap, advanced 40 per cent.
Union Properties, a developer, increased 32 per cent and Ras Al Khaimah Cement gained 26 per cent.
“This year, investors will have to do a lot more homework,” said Mr Mohindra. “Investors will have to choose companies that offer genuine growth and have robust business models and balance sheets. It’s going to be a more challenging year for investors. I am still positive but one has to choose the right stocks.”
mkassem@thenational.ae
