UAE indices gain after Fed rate hike

Dubai:

UAE indices rose more than 1 per cent on Thursday, but underperformed the wider MSCI emerging market index, a day after the US Federal Reserve hiked interest rates, as recent decline in oil prices weighed on sentiment.

The Dubai Financial Market General Index closed 1.25 per cent higher at 3,521.33. The Abu Dhabi Securities Exchange general index closed 1.13 per cent higher at 4,424.93. The wider MSCI Emerging market index jumped 2 per cent to be at 962.40.

“Emerging markets have outperformed our local market because oil prices is acting as a dampener as far our market goes,” said Saleem Khokhar, head of asset management at National Bank of Abu Dhabi Asset Management. Oil prices have fallen 12 per cent since last week after hitting a high of $57 per barrel.

“Investor sentiment appears to geared towards high beta, mid-cap names such as Damac, DFM,” Khokhar said. Damac Properties closed more than 4 per cent to end at Dh2.86. DFM shares rose 3.91 per cent higher at Dh1.33. Banking names were active on Abu Dhabi bourse.

“Banking stocks tend to do well, when rates rise because of the positive impact on net interest margin,” said Khokhar, adding: “The overriding factor would be that growth in global environment would be strong enough to cope with rising rates.”

National Bank of Abu Dhabi closed 3.47 per cent higher at Dh10.15. First Gulf Bank closed 2.43 per cent higher at Dh12.65.

Abu Dhabi Commercial Bank, which went ex-dividend, traded just over the support at Dh7.00. ADCB closed 2.43 per cent lower at Dh6.84.

“If the price breaks below the support at Dh6.60, may target Dh6.48/6.30 short term,” said National Bank of Abu Dhabi Securities in a note. Aldar Properties closed 3.96 per cent higher at Dh2.36. Bank of Sharjah closed 1.43 per cent higher at Dh1.42.

Stability

Stability in oil price as well as the continued diversification towards non-oil revenues is required for regional markets to outperform, Khokhar said.

“One will have to look at relative valuations. The EM are fairly priced at current levels where as our markets are relatively better valuations,” Khokhar said.

A number of positive catalyst are on the horizon such as Saudi being placed on EM status, and upcoming Aramco IPO along with the National Transformation Plan.

Elsewhere in the region on Thursday, the Saudi Arabia’s Tadawul index closed 1.26 per cent higher at 6,921.60, while the parallel market index or Nomu closed 0.38 per cent higher at 5,413.95.

The Qatar exchange index closed 0.67 per cent higher at 10,361.03. The Muscat Securities MSM 30 index closed at 5,668.33, up 0.14 per cent.