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Stagflation worries seem to be on the minds of Asian investors, after weak growth signals from China. But UAE investors are thinking local - and it's helping. Image Credit: Ahmed Ramzan/ Gulf News

Dubai: UAE stock market investors have – so far – not turned jittery and follow othered Asian markets into the red, as concerns swirl about whether the China economy is getting into a lull phase.

Before the start of trading today, there were some analysts keeping their fingers crossed that UAE markets and their investors would hold the line. And that seems to have been exactly how investors responded, with the DFM index showing an initial sharp drop and then edging its way back to be 0.18 per cent lower by 01:00pm.

ADX is just 0.06 per cent down, with fairly brisk volumes for Multiply and Borouge, both trending positive at 01:00pm. IHC is down marginally (with Dh156 million in trades), and so is Alpha Dhabi (Dh88.5 million in trades) and Q Holding (Dh78 million).

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The Saudi Tadawul too is cruising in positive territory, with bellwether Aramco seeming to have pleased investors with its talk about performance-linked dividend from the third-quarter. (And they seem to be discounting the second-quarter profit dip the energy giant posted this week.)

In contrast, except for Hong Kong’s Hang Seng index, Asia’s biggest stock markets are in the red, spooked by every mention of stagflation possibilities in China and how that would play up in the global economy. The next two days of trades could provide broader insight into how the rest of the world’s investors are thinking, and whether this dip will end up being shrugged off. India’s BSE clawed back some of the losses in the afternoon, down 46 points at 1.22pm after being closer to 300 points down earlier. (The Sensex is now back in the plus, up 146 points at 2:08.)

In the UAE, “institutional investors haven’t made any decisive moves in a partial selling of their positions,” said an analyst. “Most investors are going by signals coming from the local economy, and that’s quite positive.”

Plus, on the DFM, the Dubai utility giant DEWA is all set to sign off on a Dh3 billion plus dividend payout for its H1-23 performance on Thursday.

“The GCC markets are holding their ground by the looks of it,” said Vijay Valecha, Chief Investment Officer at Dubai’s Century Financial. “With the recent downgrades in US banking, there could be a small liquidity crunch. But it shouldn’t affect the markets in a very negative way.

The UAE and Gulf retail investors should always be ready for short-term pullbacks, but the economies in the GCC are doing well. And so, one should look to continue holding on or accumulating at lower levels.

- Vijay Valecha
Expert view
What should retail investors be doing?
We would suggest retail investors keep an eye on mid- to long-term returns instead of getting swayed by daily sentiments. There are numerous untapped opportunities in the region that should provide stability to an investor’s portfolio in the long run, along with giving better returns.

-Junaid Ansari is Director of Investments Strategy & Research at Kamco Invest.

The projects’ market remains strong and we believe international institutional investors would weigh this data while investing in the region.

- Junaid Ansari

Real estate results

The coming days will have the likes of Emaar announce their Q2/H1-23 financials, and should give insights into how demand for property might fare in the coming weeks. Every indication provided by market analysts – stock and real estate – suggest that inward investments into property buying will hold up.

“Some of the listed energy company profit numbers came in lower, but banking results have more than overcompensated,” said an analyst. “Aldar delivered strong, and the numbers for Emaar should provide another short-term boost.”

Choppy Q3-23?

Major economies slipping into a full-on recession does seem less of a likelihood at this vantage point, but heading into September could see other worries jostle for investor attention. Chances of stagflation - with slow growth, job losses and inflation – are what could prove more worrisome.

Will UAE investors go for profit-taking?

Some of the blue-chip stocks on DFM have had some sharp gains in recent weeks. Expect some profit-taking to happen in the coming days. And if global markets were to signal more distress.

“We’ve had a significant run-up in the UAE markets, though from significantly undervalued levels,” said an investor. “Any external negative effects may have some impact in the short run.

“Domestically, growth in some noncyclical industries - infrastructure, healthcare, education - should be more resilient. The larger issue will be one of interest rates and how that affects earnings. It already has in some cases, and whether top-line numbers can overcome that ‘drag’ in the third and fourth quarters.”

For today, though, UAE investors are not up for any negative vibes.