Dubai: Investors should be selective and cherry pick the stocks as markets head for stability in coming weeks, market participants said.

The Dubai Financial Market General Index rose as much as nearly 3 per cent on Sunday, extending gains for a fourth session. The index had shed more than 14 per cent in the week to October 16.

Concern that a Europe-led slowdown in global growth would hurt the world’s largest economy, just as the Federal Reserve winds down stimulus, erased as much as $2.1 trillion (Dh7.7 trillion) in US equity values after they reached a record on September 6.

“It’s important to be selective in your positioning of sectors and stocks. We like banking sector, though petrochemicals has been suffering due to crude oil. We prefer banking sector over petrochemicals,” said Saleem Khokhar, head of equities at NBAD Asset Management Group, who helps manage a portfolio of Dh7 billion out of the total size of Dh11 billion.

Banks are expected to report higher earnings supported by lower provisions and strong loan growth in the consumer banking business.

With the rising business confidence in the corporate sector, recovery in the real estate business and increased government spending are expected to drive asset growth and profitability of UAE banks according to SICO, a Bahrain-based investment bank.

In the UAE, credit growth in the banking sector was about 4 per cent for the first six months of this year. Analysts expect the overall credit for the year to be about 7 per cent with a stronger outlook for next year.

Credit rating agency Standard and Poor’s expects around 8-9 per cent credit growth for the sector in 2014-2015, in line with healthy economic activity driven by strong government spending, and non-oil private sector growth.

Emirates NBD on Wednesday reported a 51 per cent increase in the net profits to Dh3.9 billion for the first 9 months of 2014.

“The Banking sector looks promising, along with selective real estate cos and telecom companies,” Tareq Qaqish, the head of asset management at Al Mal Capital.

The banks numbers have been growing very strong and that makes the UAE story very strong, and definitely that would boost the markets and enhance the appetite for growth potential, said Qaqish.

Active Arabtec

“Arabtec has been very active since the last few days. The trading volume is increasing on speculation on stake sale by ex-ceo. The important point is the price at which the deal will be executed,” said Qaqish.

Arabtec’s former chief executive, Hasan Ismaik, who resigned abruptly in June, holds about 28 per cent in the company. Ismaik had said earlier that he was in talks with Abu Dhabi state fund, Aabar Investments, to sell part of his stake.

But on September 16, the company said it was unaware of any rumoured stake sale by its former CEO. Arabtec was at the centre of a selloff in June that wiped more than 20 per cent off the value of Dubai’s benchmark stock index, triggered by management changes and investor concern the company may be losing support from Abu Dhabi.

Abu Dhabi state fund Aabar Investments owns 18.94 per cent in Arabtec, the largest publicly traded construction company in the Middle East.