Dubai: Traders in the UAE bourse have been stuck with positions and don’t know what to do: ie to book losses or to stay in the market.
The Dubai Financial Market General index has been falling since the past three years, registering a fall of 50 per cent from the high of more than 5,000 in the last 36 months. The DFM index closed 0.22 per cent lower at 2,526.02 on Thursday. Traded value has also fallen from a daily average of Dh2-3 billion in 2016 to Dh100-200 million now, indicating declining interest from institutions.
Traders are still stuck with their positions in shares like Gulf Finance House (GFH) or Emaar Properties among others. GFH used to trade Dh2.27 in 2017 and share prices have fallen to Dh0.85. Emaar Properties shares have fallen from a high of Dh9 to less than Dh5 now.
“With MSCI and FTSE flows expected in 2019, turnover in Saudi should likely increase while the UAE is a more trickier call to take. The market still lacks any major catalysts and despite turnover declining significantly in Dubai and also Abu Dhabi, we do not see any reason for pick up in trading volumes YoY in 2019,” Nishit Lakhotia, head of Research at SICO Bank told Gulf News.
Traders had shifted to Saudi markets in the third quarter last year when the market was upgraded to the emerging market index. But that has also witnessed waning interest.
Even though the index has gained marginally, traded value on Saudi Arabia’s Tadawul index have also fallen from a high of 5 billion Saudi riyals (Dh4.9 billion) to 1-2 billion riyals.
Analysts expect a revival in trading volumes as traders pin high hopes on the upgrade as an emerging market index this year on the MSCI emerging market index or on the FTSE emerging markets index.
Defensive approach
SICO Bank recommends a defensive approach going ahead.
“We are telling clients to either be in high yield value play or names with clear earnings-trigger due to expansion,” Lakhotia said.
The year 2018 was a difficult year for the Dubai bourse, while the Abu Dhabi index managed to eke out gains due to strong performance of banking stocks and Etisalat. The Tadawul index registered an increase of 12 per cent last year.
Analysts say that oil price taken into consideration while planning for the budget is on the higher side, making budget prone to more deficits, which according to analysts may be the new normal.
“Some sectors, such as petrochemicals, can get de-rated as they are not trading cheap and factoring the new normal. While on banks one can be over-weight, as they will benefit from expansionary budget push and rising interest rates,” he added.
M.R. Raghu at Markaz recommends investors to eye banking stocks.
“Given the huge financing needs, financials, particularly banking stocks, could perform well. Environment of increasing interest rates could further boost their profitability as we have seen in the past few quarters. Large banks that have access to lucrative government deals could be our picks,” Raghum who is the head of research at Kuwait Financial Centre — Markaz said.