It's time to invest in Dubai shares, say investment analysts

To be or not to be is the dilemma for investors when it comes to taking the final decision about putting their funds in any investment, more so if it volatile equities that one wishes to invest in.

Many retail investors – barring day traders – sit on the fence contemplating long and hard when to leap into equity markets with their hard-earned savings or borrowed money, fearing the risk of losing their cash.

But if you’re looking to invest in the UAE and other GCC equities, now may be the right time considering their low and attractive valuations compared to their emerging market peers.

The markets have lost some of their value of late in line with the decline in crude prices, making local and regional stock valuations more attractive.

This is reflected in a new advisory by an investment bank claiming that investors looking for medium and long term investments should re-enter the markets now.

“Medium-term and long-term investors can re-enter the Dubai Financial Market above 3,700 points and 4,000 points – respectively,” reads Kuwaiti investment bank Global Investment House advisory.

“A close above 4,000 points would decrease the downside risk, which would then open the road for the next target level at 4,400 points and maybe 4,700 points,” it said in its Technical Overview of DFM in its 10-page GCC Equity Monitor note.

The DFM General Index on Sunday closed 1.37 per cent up at 3,805 points.

The Bank of America-Merrill Lynch also recently suggested a strong double-digit upside potential for the local equities.

Kuwait-based Asiay Investments recently also said the UAE and Bahrain present a positive outlook, in particular UAE, after it secured the organisation of Expo 2020 and the stock market was upgraded by MSCI from the frontier markets index to emerging markets index.

In terms of valuations, according Global’s GCC Market Performance report for the month of March, the price earning (PE) ratio of the GCC markets stands at 8.4-17.3x, broadly lower than its market peers.

“As the large GCC markets, such as the UAE and Qatar, are a part of the MSCI Emerging Markets Index, with Saudi Arabia being included in the index in 2017, the growth outlook for the stock market is positive. GCC markets are expected to maintain their spending in the long term, which would fuel growth, and in turn, the stock markets,” according to Global analysts Rasha Al Qenaei and Naveed Ahmed.

“GCC markets ended lower in March, as oil price remained subdued despite an expectation that prices may go up… Furthermore, investors were cautious ahead of the Q1 2015 earnings, which resulted in profit booking. Despite the negative sentiment, we believe long-term outlook for GCC markets is positive, as crude oil prices seem to have also bottomed out and are expected to increase in the medium term. As a testament, in the first week of March, Saudi Arabia raised the official selling for oil deliveries to the US and Asia, thus boosting the overall market sentiment,” the analysts said.

“Going forward, we expect GCC economies to robust in longer run, supported by stable growth in infrastructure spending as well as diversification into non-oil sectors,” they added.

Led by the Dubai bourse, the GCC markets ended lower in March 2015 as falling oil dampened investor sentiment. The combined market capitalisation of GCC bourses declined 6.3 per cent month-on-month to $1 trillion March.

Disclaimer: Any equities mentioned and investment advice provided by the financial institutions is generic in nature and may not suit all investors. You are advised to undertake your own due diligence and consult an advisor before making any investment decisions. Emirates 24|7 will not be liable for any losses – direct or indirect – that may arise from your reliance on such information.

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