Stock Dubai Financial Market TRADERS DFM
A dip no loner... The Dubai Financial Market and its Abu Dhabi counterpart recovered ground as global investors cheer US no-move on rate hikes. Image Credit: Virendra Saklani/Gulf News

Dubai and Abu Dhabi stocks advanced in early Thursday trade and mirroring global markets following the US Federal Reserve's dovish comments on likely interest rate hikes.

The much-awaited Fed's policy statement made it clear that the central bank had no plan to get away from ultra-easy monetary policy measures any time soon. And that it will allow the US economy to fly high even at the risk of inflation overshooting stated targets.

Quite the comeback

Dubai Financial Market traded 0.4 per cent higher at 2,611 points, making for a smart comeback from last session's retreat. Investors turned cautious on Wednesday in the GCC - and globally - to awaiting the Fed monetary policy guidance, which had put the brakes on a five-day bull run by the UAE's two markets.

Graph Analysis
Markets are taking their cue from US Fed’s no-change status. Image Credit: FXPrimus

Thursday's rally was led by financial and real estate stocks, which exercise significant weight on the index. Dubai's largest lender and developer, Emirates NBD and Emaar properties, advanced to provide the biggest boost to what was the sixth advance in the last seven sessions.

"The Gulf as a whole may be ring-fenced from the risk of higher rates," said Kaia Parv, Head of Investment Research at FXPrimus. "Goldman Sachs estimates GCC’s borrowing to plunge region this year by 96 per cent, supported by the re-opening of global economies and oil price recovering to $65 per barrel.

"On average, GCC members need $50 per barrel to balance their budgets, with Saudi Arabia being the exception with $80 per barrel to breakeven. The headwinds could arise from higher US dollar that in turn is bolstered by higher relative interest rates."

Kaia R Parv of FXPrimus
Kaia R Parv, Head of Investment Research at FXPrimus Image Credit: FXPrimus

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Abu Dhabi Securities Exchange ticked 0.2 per cent higher to trade at 5,759 points, bolstered by across-the-sectors gains. But the single-biggest push came in from the telco Etisalat, which rose 0.8 per cent on a ninth day and has sent the stock soaring above 26 pe cent for the year. It owes its impressive run to wider bullish sentiments, but also to what it did earlier this year from a special dividend handout to higher full-year profits and foreign ownership hike.

Dividend push

Qatar Exchange edged up 0.1 per cent with industrial and material stocks leading the way. Baladna Company was the top gainer with a 4.2 per cent surge after its board recommended dividend payout amounting to 5.3 per cent of nominal share value. Other smaller GCC markets made small steps benefitting from the regional and global rally.

Soothing Gulf investors
Global and Gulf investors had all been anticipating Wednesday’s US Fed FOMC meeting, the ensuing monetary policy statement and press conference. The main topic on everyone’s agenda is around inflation expectations, commitment to 'Average Inflation Targeting', but also US Treasury's 10-year yield reaching 1.67% on Wednesday," said Kaia Parv, Head of Investment Research at FXPrimus.

"The Treasury 10-year yield, also the benchmark for risk-free rate, has been in an upward trend since January, but truly picked up momentum since late February. The ripple effect of steepening yield curve and rising borrowing costs can be felt across global markets, with the Gulf region being no exception."