Dubai: Emirates NBD has pinned its hopes on the possible announcement of Saudi Arabia’s inclusion on the MSCI Emerging Market index in March and Aramco’s initial public offering, two developments the UAE lender is banking on to drive a turnaround for Gulf equities and result in a huge “wave” of money flowing into capital markets.
Gulf equities have been laggards in terms of performance compared to their emerging or developed markets peers. In 2017, the Dubai Financial Market (DFM) General Index fell 4 per cent compared to a 28 per cent rise in the MSCI Emerging Market index.
“GCC equities are still trailing the emerging markets but there are potentially two key factors that could change that in 2018 and both are associated with the Saudi Arabian market. The announcement of the Saudi Arabian market inclusion in the MSCI index will have a tremendous impact on regional equities, and we expect that announcement to be positive,” Tariq Bin Hendi, acting chief investment officer at Emirates NBD, told journalists at a briefing. Emirates NBD has a hold-and-wait approach on GCC equities.
A weightage of 2.5 per cent or 3 per cent on the MSCI Emerging Market index would translate into $4 billion (Dh14.7 billion) flowing into the market, Bin Hendi said. Along with the MSCI index inclusion, other factors like Aramco’s IPO would help unleash other attractive fundamentals of GCC equities.
“If we look at stocks in the UAE with very healthy yields and dividends, should they be trading where they are trading today? There is still a lot of upside to be had in the next three to four years, depending on the sector and firm selected.” Bin Hendi said.
“UAE Equities are trailing their emerging market peers substantially and currently present very attractive yield opportunities for investors. Should the MSCI announcement be positive, it will provide a boost to local markets. We have a lot of conviction around this,” he added.
