Dubai: The looming upgrade of UAE exchanges from frontier to emerging market status stoked interest in the MSCI shares on Thursday, building up a head of steam that resulted in high trading values on both the Dubai Financial Market and the Abu Dhabi Securities Exchange.
Trading in Dubai was worth a total of Dh3.7 billion, roughly double its usual range, with Abu Dhabi reaching Dh2.4 billion, about four times higher than its typical level in recent weeks.
That drove the DFM index up by 4.99 per cent to close at 5.087.47 and the ADX to finish 5.54 per cent up at 5,253.41.
Traders’ interest was focused primarily on the nine shares that became part of the MSCI Emerging Markets index when the trading day closed.
Emaar topped the value chart on both markets, with trades worth Dh1.1 billion, knocking Arabtec into second place with Dh976 million worth of trades.
In Abu Dhabi, Aldar saw trades worth Dh1 billion, and the National Bank of Abu Dhabi, First Gulf Bank and Abu Dhabi Commercial Bank all saw trades above Dh300 million in value.
“The cash escaped from Arabtec to go into Emaar,” said technical analyst Osama Al Ashri, who said he expected both the DFM and ADX indices to rise further.
“With the DFM we are awaiting new up targets of 5,580 to 5,730, maybe next month, maybe the month after, it’s not clear, but I think the index will approach this target if it exceeds resistance at 5,185. The ADX has a new target at 5,704.”
But a monthly Reuters survey showed a substantial number of Middle East funds intend to cut their exposure to stocks in the UAE and Qatar, shifting money to less richly valued markets such as Saudi Arabia.
Shares in Dubai, Abu Dhabi and Qatar have surged over the past 12 months in anticipation of those markets’ upgrade to MSCI’s emerging market index, which will take place at the end of this week.
Many funds believe risk/reward ratios for the three markets have now deteriorated: the latest survey of 15 leading investment managers, conducted over the past 10 days, found only 20 per cent expect to increase their allocations to UAE equities in the next three months, while 40 per cent expect to cut them.
These figures mark a further deterioration from the April survey, when 27 per cent of managers expected to raise their UAE equity allocations and 40 per cent expected to reduce them.
In Qatar’s stock market, 20 per cent of funds expect to increase their allocations while 33 per cent foresee cutting them. That is a major shift from April, when 40 per cent intended to raise allocations and only 13 per cent to decrease them.
“The markets are volatile in UAE and Qatar, and may continue to be so in June until the end of Q2,” said Mohammed Ali Yasin, managing director of NBAD Securities in Abu Dhabi.
The survey was conducted by Trading Middle East, a Reuters forum for market professionals.
— With inputs from Reuters