Dubai market beats regional contenders

Dubai is the best-performing Gulf market so far this year as improving investor sentiment helps stocks rebound from last year's slump.

Stronger earnings, dividend payments and cheerier global markets have helped underpin a rally across the three biggest regional exchanges. The surge follows an abysmal performance last year as the euro-zone debt crisis and the Arab Spring meant many markets ended in the red.

"The UAE is beginning to look interesting," said Saleem Khokhar, the head of equities at the National Bank of Abu Dhabi (NBAD). "It gives me a comfort level that companies see investors need to be rewarded which calls for a re-rating on the valuation of our markets."

Although the Dubai Financial Market General Index dipped by 1.2 per cent yesterday as investors moved to take profits, the index is still 6.1 per cent up so far this year at 1,435.96. The Abu Dhabi Securities Exchange General Index closed up 0.43 per cent at 2,476.62 yesterday, helping to extend its gains for the year to date to 3.09 per cent.

Egypt rose 28 per cent last month, making it the top performer among emerging markets. In Saudi Arabia, the Tadawul All-Share Index is 3.83 per cent higher in the year to date. But other markets have missed out on the rally, with bourses in Qatar, Oman and Bahrain all lower. The UAE's rally mirrors a positive pattern across the globe from Shanghai to New York. Equities around the world got off to the best start in 18 years last month. The MSCI All-Country World Index rose 5.8 per cent.

Signs of accelerating US economic growth and European leaders moving closer to a resolution of the debt turmoil have reassured investors.

Locally, sentiment has been bolstered by a slew of positive corporate earnings results in recent days.

In a further lift to confidence, some companies have shown a willingness to fork out some of their earnings and rewards shareholders. Abu Dhabi Commercial Bank's board approved a Dh816.7 million (US$222.3m) cash dividend of 20 per cent after its fourth-quarter profits rose 39 per cent. It was the first payout by the bank since 2008.

NBAD announced a cash dividend and a 30 per cent distribution of bonus shares after full-year profit rose 0.6 per cent to Dh3.7 billion.

But analysts are warning the rally has the potential to fizzle out.

"Tourism, trading, aviation and logistics, the pillars of Dubai, are thriving, but financial market valuations are not reflecting the strong fundamentals of the economy," said Rami Sidani, the head of Middle East and North Africa investments at Schroder Investment Management in Dubai.

Last year, the UAE was one of the laggards of the region, with the Abu Dhabi bourse losing 11.6 per cent and the Dubai benchmark shedding 16.9 per cent.

tarnold@thenational.ae

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