Abu Dhabi: Investors in the UAE’s stock markets continued to shy away from trade as they waited for more clarity to come out on how the UK plans to support its economy after voting to leave the European Union.
The move to opt out of trade appears to be much like that in the US markets where investors are already “clearly getting bored with the political impasse and the slow moving political dance in the UK-EU story,” as described by Citigroup analysts.
It is, however, in complete contrast with European markets where most major indices rose over two per cent during trade for the second day in a row.
On Wednesday, the Dubai Financial Market (DFM) index fell 0.38 per cent to 3,271.38, while the Abu Dhabi Securities Exchange (ADX) general index rose 0.22 per cent to 4,417.03.
“The lack of catalysts here so far is still controlling the market. Yes, Brent prices are up and international markets are up, but for us with the coming (Eid) holiday and the uncertainty, investors are sitting on the side. They don’t want to take positions during that time because they’re not certain what’s going to happen on the international front and there’s also nothing in the UAE to trigger trade,” said Tariq Qaqish, managing director of asset management at Al Mal Capital in Dubai.
News coming out of the UK and impact on oil prices will determine which direction local markets take over the next few weeks.
Investors are also waiting for news on economic stimulus. Analysts have speculated since Friday’s Brexit vote that central banks across the world will adopt fiscal policies to stimulate their economies — namely policies to lower interest rates.
“The Brexit will delay an increase in interest rates by the US Federal Reserve. They were supposed to be in June, and then September, and now it might be in December or even next year, but that delay is good for the riskier asset classes like equities.
Regionally, Q2 results might not be the catalyst the market is waiting for because we’re going to see weakness, so it’s mostly going to be driven by oil and international market performance,” Qaqish said.
In the capital, the National Bank of Abu Dhabi and Abu Dhabi Commercial Bank rose 1.2 per cent and 1.17 per cent respectively.
On DFM, Dubai Parks fell 3.16 per cent, as Emaar slid 0.16 per cent, and Dubai Islamic Bank went down 0.99 per cent. Mashreq Bank plunged nine per cent, which alone brought the DFM index 0.15 per cent down.
“I know it’s hard for investors to see they’re losing money but on the other side of that, valuations become more attractive, which brings fresh money into the market,” Qaqish said.
The DFM index on Sunday fall as much as around 4.7 per cent in the first trade session after the Brexit, and has been moving less than one per cent each day since then.
