News Column

UAE indices lead global gainers list in July

August 5, 2014

Naushad K Cherrayil Staff Reporter

Dubai: UAE stock market indices have made a strong turnaround to become the best performers globally in July and claw back some of the losses sustained in a bear market in June, Gulf News research showed.

In June, DFM fell 22.50 per cent while ADX fell by 13.37 per cent. But in July, DFM surged 22.58 per cent to lead the global gainers list, followed by ADX with 11.07 per cent and Shanghai's Composite Index with 7.48 per cent.

The rally is led by real estate, banks, finance and investment shares.

Arabtec, which fuelled the collapse in May and June on Dubai bourse, advanced 63 per cent in July. Arabtec's shares have fallen 61 per cent in June from a record close on May 14 by 11.65 per cent because of rumours about its relationship with its big shareholder Aabar Investments.

Rami Sidani, head of investments at Schroders Mena said that Arabtec has been the darling of the retail investors at the beginning of the year, fuelled by inaccurate statements by the former CEO and accordingly, retail investors have been involved heavily in the stock. In the last three months, Arabtec has roughly accounted for "half of the average" daily volume.

He said the market has been very volatile. The volatility has been going on for the last three months.

"We saw a very strong price appreciation before the inclusion of the UAE index in the MSCI by the end of May. Post inclusion, we saw a market correction taking place after certain shares appreciating to exorbitant levels," he said.

Arabtec was dictating the "performance of the market" for the past two months.

He said there is still uncertainty surrounding the shares but it is back to more reasonable level of Dh5 after peaking at Dh7.5 for no fundamental reason.

"The fundamentals in the UAE, especially in Dubai, are strong due to the main growth pillars like tourism, trade and logistics," he said.

UAE represents 45 per cent of the MSCI index, so UAE is on the "investment map" of foreign investors. "The cash inflow into the UAE markets from foreign investors will be gradual," he said.

In 2013, DFM was the second-best performer with 107.69 per cent after Venezuela's benchmark IBC Index, which appreciated a whopping 480.47 per cent while Abu Dhabi's ADX index rose by 63.08 per cent.

So far this year, DFM is up by 43.43 per cent and ADX by 17.82 per cent despite facing turbulence.

"The trading volume is still below average. The main reason is due to low trading on Arabtec shares. It now represents about 30 per cent of trading volume compared to 60 per cent couples of weeks back," said Mohammad Ali Yasin, managing director of NBAD Securities in Abu Dhabi.

Traders are not ready to build any "new positions" despite strong earnings results as it is summer season.

Yasin said that first-half earnings reports across the board are strong, especially from the banking sector.

Argentina's main stock index Mervel is still the best performing index globally and has surged 51.88 per cent so far this year.

But the stocks could only rise 3.81 per cent in July on fears that bond default will destabilise the economy.

The index fell 8.39 per cent on Thursday.

"Only selective trading is expected in August and the rally is expected to happen only in the middle of September when traders are back after the summer holidays," Yasin said.

According to Marwan Shuraab, fund manager and head of trading at Vision Investments, lack of new liquidity and summer holidays is holding back investors.

He said Dubai stocks are still overvalued compared to other emerging markets.

"Arabtec is still considered one of the most expensive shares in the market. With uncertainties from the Arabtec management, the pressure will be on the shares. The management needs to have a clear vision," Yasin said.

For more stories on investments and markets, please see HispanicBusiness' Finance Channel

Source: Gulf News (United Arab Emirates)

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