Dubai: After a spectacular recovery on UAE indices since mid-January, fund managers are unsure of the continuity in performance as investors brace for April 17 meeting between and Opec and non-Opec producers and late April meeting of the US Federal Reserve,

The Dubai Financial Market General index has gained 28 per cent since January 20, and total volumes traded were at Dh57 billion, 50 per cent of which were registered in March alone as investors betted on dividend-yielding stocks and etisalat, among other stocks. But in the past few sessions, volumes have again been falling, a trend that fund managers expect to continue in coming months until September this year.

“What we see in the market now is substantially decreasing liquidity for the past few sessions. Most of the stocks are trading ex-div, so that is the reason we are seeing such a massive slowdown. Most of the investors are on the sidelines, trying to avoid aggressive investment decisions as we are close to announcement of first quarter results,” Mohammad Ali Yasin, managing director at NBAD Securities, told Gulf News.

Traders would be eagerly looking at the first quarter results, which are expected later in the month, after better than expected figures for 2015 to see the impact of falling oil prices on the real economy.

“The first quarter results are expected to be neutral, and for some companies it could be a bit negative. The results will not encourage new liquidity in the market. We don’t expect indices to break the new highs. I don’t see active trading by speculators,” Yasin said. The first quarter results are used by the fund managers to build in their expectations for results of 2016.

“On the real estate, there is a slowdown in the activities, although the new projects are still being sold, but it is not with the same kind of momentum that we saw last year. Telcos, which are generally defensive, results are also going to be neutral. Therefore in terms of index movement, first quarter results, which are expected to be neutral,” Yasin said. He expects neutral to negative results for banks in the country.

Liquidity

Yasin feels capital raising programmes from Dubai Islamic Bank and Dubai Parks and Resorts, including Abu Dhabi National Insurance Co’s plan to issue convertible bonds would also hamper liquidity in the stock markets.

“These issues would present strong pressure points in markets as liquidity would be diverted to a few companies instead of coming into the market,” Yasin said.

These companies may be looking to raise Dh6 billion.

However, Yasin expects a trend reversal from September onwards. “The last third of the year, i.e. September onwards, we could have a strong reversal on markets because by that time the bad news would have been factored in, and therefore we may see a third quarter surprise on the upside,” Yasin said. If that happens, “a lot of people have got dividends, and are in process of getting dividends, so these people may use the opportunity between now and September to enter the market and benefit from the recovery”, he added.

Even the valuations are attractive compared to other emerging markets.

The average PE (price to earnings ratio) is around 11-12 times in the UAE currently, compared to a comfortable PE range of around 15 times, and price to book is at 1-1.2 times, while Qatar is still a little more expensive. Average PE for emerging markets is 13.79 times.

“We did get some flows from international money and that came in with re-pricing and inclusion of etisalat in the FTSE index. Emerging markets saw a lot of inflow coming because they were at its lowest. In terms of valuations, our companies are very cheap compared to other emerging markets,” Yasin said.