With the US elections all set for tomorrow, global markets are likely to stay volatile. A Joe Biden win is considered as positive due to prospects of a larger fiscal stimulus as well as higher government expenditure.
Typically, a Democrat in the White House has been characterized by large fiscal deficits and which could result in a weaker dollar this time around.
In October, the UAE's benchmark indices gave a mixed performance, DFM closed lower by 3.77 per cent while ADX rallied 3.14 per cent.
Real estate stars
The stars of October were Aldar Properties, with the stock rallying 36.32 per cent, while Methaq Takaful Insurance gained 21.13 per cent. Damac Properties was higher by 19.65 per cent, the Agthia Group's stock rose 17.37 per cent, and Reem Investments closed higher by 15 per cent.
Real estate shares were boosted by a surge in transactions on account of depressed valuations. It is expected that record low-interest rates will boost demand.
And then the laggards
The worst performers were Emirates Driving Company, which declined 9.63 per cent, DXB Entertainments (10.16 per cent), Dubai Islamic Insurance (12.32 per cent), Islamic Arab Insurance (13.29 per cent) and Amlak Finance, which dropped the most by 13.74 per cent.
The resurgence in the pandemic across Europe and Asia seems to be the reason for the sharp fall in DXB Entertainments. Virus-sensitive sectors like cruises, tourism, restaurants and airlines have performed weakly. The fear is that the winter will cause the pandemic to worsen and cause severe disruptions.
While Gulf Pharmaceutical rallied 13.74 per cent in October for exactly those concerns, Air Arabia declined by 2.65 per cent.
Banks take a hit
Among banks, Emirates NBD was the worst performer with a fall of 9.52 per cent due to a rise in write-offs. The exposure of Emirates NBD to economically fragile Turkey is negative for the share. In fact, it was Emirates NBD's performance that dragged down the DFM index.
Other major banks performed relatively well due to their UAE focus. Mashreq Bank rallied by 8.37 per cent, CBI by 7.67 per cent, ADCB by 4.26 per cent, ADIB by 3.08 per cent and FAB gained 2.87 per cent.
The performance of UAE equities this month will depend to a huge degree on how the US elections shape up.
- Vijay Valecha is Chief Investment Officer at Century Financial.