181224 M.R. Raghu
M.R. Raghu Image Credit: Supplied


UAE traders in stock markets, who may be sitting on losses, are in two minds whether to book losses and sit on cash or wait for a longer term for future gains.

Analysts feel there might be more pain in the short-term because of weak fundamentals of real estate and banking stocks.

“There is a fear in the minds of people, whether the stocks will go lower from here, and how much of downside it has, and how much they can withstand to avoid any margin calls,” said an analyst who did not wish to be named.

Traders have been unable to lock in gains on the Dubai index, which has been struggling for the past five years after having lost 52 per cent. In fact the index has seen only one rally in 2013-14 in the past 10 years.

The real estate sector has played a key role in this meltdown, with the UAE Central Bank noting in its quarterly report that realty prices have been on the back foot — the result of a softer job market that continues to weigh on housing demand.

“We believe investors should stay invested as there are lot of short and long-term catalysts including the MSCI inclusion and the Saudi budget 2019 which will support capital expenditure and reduce wage bill. While the market will continue to face some pressure due to low oil price, there is a good number of idiosyncratic stories which should outperform the market significantly,” Charles-Henry Monchau, Managing Director — CIO & Head of Investment Management at Al Mal Capital told Gulf News.

Dubai stocks have been trading at the cheapest value in the region, which might trigger outperformance incase of any recovery in local or global indices.

“Dubai market is currently trading at single digit valuation (trailing P/E of 7). The government has been active and has initiated several reforms across sectors including injecting stimulus, relaxing regulations among various others to fasttrack growth. As a result, we see some green shoots in the economy,” M.R. Raghu, Head of Research at Kuwait Financial Centre — Markaz said.

And in the real estate space, bellwether Emaar Properties, which has been the worst hit, may see some value.

“We believe the stock is a deep value opportunity but this value will not be crystalized until we see evidences of a strong growth in the overall economy,” Monchau said.

Emaar Properties has shed 37 per cent in the past one year compared to 21 per cent in the Dubai index.

“Emaar has been detracting ever since it gave lower than expected dividend from its proceeds of partial stake sale in Emaar Development. Significant capital expenditure requirements across different divisions and complexity of business (hospitality, entertainment, international property development) have dragged the stock down,” Raghu told Gulf News.