The year has started well for UAE indices with DFM rallying 8.05 per cent and ADX by 3.45 percent. But let us look at how 2020 panned out for the sub-sectors as DFM declined 9.86 per cent and ADX marginally by 0.59 per cent.
The best category performers were financial services and insurance indexes, which rallied 21.26 per cent and 19.19 per cent. The same story played out on ADX, with the financial service and investment index rallying by a muscular 125 per cent. The second-best performing was consumer staples, with a spectacular gain of 118 per cent.
The divergent returns of the real estate indices on the two stock exchanges offer a peek into their contrasting fundamentals. ADX's real estate index gained 43.50 per cent through 2020, whereas on DFM it declined 8.15 per cent.
In the UAE's stock universe, 50 of the 126 listed stocks posted positive returns. The Top 5 performers were International Holdings Co. (up 577 per cent), Gulfa Mineral Water (304 per cent), Abu Dhabi National Energy Co. (aka TAQA, and with a gain of 206 per cent), Dubai Islamic Insurance (138 per cent) and Arkan Building Materials (110 per cent).
The relentless pace of its acquisitions supported International Holdings Co.'s share rally. TAQA benefitted from its merger with Abu Dhabi Power that made it the premier utility company in the UAE. Stocks that suffered the largest declines last year were DXB Entertainments (52 per cent), Arabtec Holding (59 per cent) and Emirates REIT (69 per cent).
Among banking stocks, the biggest gainers were Al Salam Bank Sudan (29 per cent), Sharjah Islamic Bank (11 per cent), National Bank of Umm Al Qaiwan (5 per cent) and National Bank of Fujairah (3.29 per cent). Among the worst performers were Emirates NBD (down 21 per cent), Abu Dhabi Commercial Bank (also by 21 per cent), Commercial Bank International (22 per cent), Bank of Sharjah (23 per cent) and Invest Bank (50 per cent).
In real estate, the best performers turned out to be Damac Properties (75 per cent), Aldar (45 per cent), Wahat Al Zaweya (19 per cent) and RAK Properties (10 per cent). Emaar Developments fell 30 per cent last year.
Insurance companies had a banner year, with Dubai Islamic Insurance rallying 138 per cent, Abu Dhabi National Insurance by 70 per cent, Dar Al Takaful up 69.76 per cent and Ras Al Khaimah National Insurance 66 per cent.
The mass vaccination campaign could enable the world to achieve herd immunity within the first-half of this year. There could even be a 'V' shaped rebound in the second-half.
Additionally, Democrats' win in Georgia Senate races has led to hopes of a more aggressive stimulus from President-Elect Joe Biden's administration. This has already boosted growth expectations, and energy prices are likely to stay supported under these circumstances. Hospitality, airlines, recreational services and real estate should bounce back.
- Vijay Valecha is Chief Investment Officer at Century Financial.