UAE indices sing different tunes unlike global peers
The Dubai index has declined sharply, while the Dow index has been breaching new peaks
Dubai: Global markets may have been impacted favourably or adversely from the headlines on trade war or Federal Reserve or global central banks but local markets have charted their own path since 2009.
The Dubai index, which had been following the Dow index during recession in 2008, followed a different trajectory in 2009 when the US markets witnessed recovery post recession. The Dubai index started its recovery a little late when the EXPO 2020 news came in 2013. The Dubai index was trading at 1,475 in March 2009, and stayed flat until April 2011. When the news of EXPO 2020 came in 2013, Dubai index jumped to its peak of 5,400 levels in a year. The Dow index has been on a recovery path after hitting a low of 6,443.27 on March 6, 2009. The US market recovered to 12,830 in April 2011.
Dubai index witnessed profit-taking in May 2014 from its highest level, falling to the level of 2,500 in 2019. In comparison, the Dow index has recovered from 16,000 in 2014 to 23,000 in January 2019.
“The direct impact of trade war on UAE equities has been minimal. The domestic market, especially Dubai, is skewed towards real estate & construction companies. Current slump in real estate market as evidenced by falling sales volume and decreasing capital values have largely contributed to the fall,” M.R. Raghu, Managing Director, Marmore Mena Intelligence told Gulf News. Banks and real estate account for around 48 per cent of the Dubai index.
Most of the weakness has come from Emaar Properties, which contributes to a fifth on the index. The bellwether has shed 40 per cent of its value in the past one year, compared to a 22 per cent fall on the Dubai index.
Recovery
Going ahead, Charles-Henry Monchau, Managing Director, chief investment officer and Head of Investment Management at Al Mal Capital says recovery may be on its way.
Government initiatives to grant long-term visas among others, along with the upcoming EXPO 2020 and high infrastructure spending would help aid recovery.
“For 2019, we remain positive on the UAE markets given our expectations on the corporate earnings front. Valuation of UAE markets are attractive at this juncture and they could witness revival of investor interest. We remain positive on the banking sector. Environment of increasing interest rates could further boost their profitability as we have seen in the past few quarters,” Raghu said. The Dubai index was one of the worst performing emerging markets index in 2018.