Investor confidence in UAE rises by 26.4 points

The UAE has regained investor confidence by 26.4 points to 108.9 points in the latest survey by investment bank Shuaa Capital.

Investor confidence in GCC was up by almost 19 points after the repayment of the Nakheel 2009 sukuk. Investors are also more likely to invest in GCC markets rather than Global Emerging Markets and Bric countries over the next six months, a latest survey has said.

The index for the UAE, that had gone down to 82.5 points, rose to 108.9 after the repayment, the survey said.

Investor confidence in GCC slipped to 98.1 points and returned to 116.9 after the repayment.

Prior to the Nakheel Islamic bond repayment, investor confidence took a hit and saw a significant drop and went into a negative territory. However, indicating the resilience of the markets the index has moved into a positive territory.

Investor confidence index for the UAE too showed a major improvement of more than 26 points after the sukuk repayment, Shuaa Capital said in its latest GCC Investor Sentiment Report.

"It is very clear that the investment community has a positive outlook towards the UAE economy and also a positive outlook for various stock markets across the GCC. They are positive on their outlook for the coming six months. From investment point of view also, they are finding the market more attractive than others," Oliver Schutzmann, author of the Investor Sentiment Report, told Emirates Business.

The investor confidence reflects their view on current economic climate; six months outlook on the economy as well as the current view on value of stock prices, whether stocks are undervalued or over valued.

According to Shuaa Capital, investor confidence was affected after the news on Dubai World. However, the subsequent repayment saw the confidence return in the region's markets.

"The UAE index slipped the most out of all GCC countries in part one of the survey, moving to a record low of 82.5 points, although part two saw the UAE make up much of this loss, with investor confidence rising to 108.9 points. The quick recovery made by the UAE Index clearly indicates the resilience ?of the market. It is also evident from this month's special report that investor confidence is much more robust than many media reports suggest, the professional investment community has a differentiated view on what has happened and that the investment community continues to have a positive outlook on the economy of the UAE and the prospects of its stock markets," said Schutzmann.

Part one of the Investor Confidence Index, conducted before the repayment, showed all GCC countries either dropping or remaining the same versus November's data. The UAE index slipped the most, moving to a record low of 82.5 points, although part two saw the UAE make up much of this loss, with investor confidence rising to 108.9 points, the survey said.

According to the survey, Saudi Arabia also recorded a steep slide in its index for December, falling to 134.2 points from 143.1 in November. Interestingly, Kuwait, which moved significantly between the part one and part two surveys in December, gained 12.5 points and remained relatively unchanged in the first part of December's survey, losing just 2.0 points as it moved to 83.3 points.

The six-month investor outlook for the region, took a slight hit in the beginning of the month and the effect was seen in case of all countries, apart from Qatar, compared to November.

"The majority of investors expected the economic conditions of Bric countries to strongly outperform the GCC in part one of our survey, with a balance of 43.3 per cent of respondents foreseeing an improvement, compared to the GCC which had a balance of 16.7 per cent. The UAE also saw a drop," said the survey report.

However, after the repayment, investors had a bullish outlook for the coming six months.

According to the report, Doha set the standard with an on balance figure of 46.7 per cent for part one of the December survey, indicating a bullish outlook. Doha was closely followed by the Saudi Stock Exchange and the Oman Stock exchange. "Comparatively, international markets did not fare as well. The FT-SE had an on balance figure of zero per cent while the Eurostoxx 50 and Dow Jones 30 were in the negative at -13.3 per cent and -6.7 per cent."

The UAE markets saw strong gains in investor's expectations for their performance over the next six months in the survey after the repayment of the sukuk, the report said.

"The UAE markets saw strong gains, increasing by between 12.9 per cent and 25.5 per cent with on balance figures of 35.5 per cent, 12.9 per cent and 13.1 per cent for the Abu Dhabi Stock Exchange, Dubai Financial Market and Nasdaq Dubai respectively."

Shuaa said all regional stock markets are perceived as undervalued, particularly the Saudi Stock Exchange, Doha Stock Market and Abu Dhabi Stock Exchange, which had on balance figures of 48.4 per cent, 41.9 per cent and 35.5 per cent respectively.

"There seemed to be little impact following the Nakheel sukuk payment on the outlook for international markets, with the FT-SE, Eurostoxx 50 and Dow Jones 30 all moving by less than five per cent," said the report.

Giving details of the impact on investor sentiment, the Shuaa report said of late there was a negative shift in investors' perception of current economic conditions with investor confidence towards the GCC falling from 34.5 per cent on balance in November to -50 per cent in the December part one survey.

"However, after the Nakheel sukuk payment, this figure rose to a neutral 3.2 per cent. Unsurprisingly, the UAE saw the biggest loss in investor confidence towards current economic conditions, dropping from 20.7 per cent in November to -63.3 per cent in December part one, making some of this up in part two by regaining some territory as it moved to -19.4 per cent."

Shuaa said the Oman, Kuwait and Doha Stock Markets all saw increases on November's report in investor's expectations for their performance over the next six months, when surveyed at the beginning of December.

"The three markets had on balance figures of 23.3 per cent, 6.7 per cent and 46.7 per cent respectively. Not surprisingly, there was a dramatic fall in this figure for the UAE markets, with all three exchanges in the Emirates falling by around 30 per cent. The Abu Dhabi Stock Exchange (ADX) remained positive at 10 per cent, the Dubai Financial Market was neutral and investors, on balance, expected the Nasdaq Dubai to decline slightly over the next six months ."

The survey data showed that in the second half of December, the Dubai Financial Market recorded an increase on balance, moving to 3.2 per cent. Meanwhile, all other regional exchanges declined slightly. Due to the Saudi Stock Exchange's 7.4 per cent slide in the second half of December, the Abu Dhabi Stock Exchange is now seen as the most undervalued stock market according to the surveyed investors.

Stock market valuations were relatively unaffected and investors' perception on the value of Abu Dhabi Stock Exchange, Doha Stock Market and DFM took a "slight hit" in the beginning of December.

Perception of investors of current economic conditions in Bahrain, Kuwait, Qatar, Oman, and Saudi Arabia all fell by between 12.6 per cent and 25.2 per cent, moving to -36.7 per cent, -60 per cent, 30 per cent , -13.3 per cent, and 30 per cent respectively in December part one.

"Meanwhile, after the Nakheel sukuk repayment, all economies, except Saudi Arabia, which fell by another one per cent, matched the UAE and recorded significant gains on December's first survey. After the UAE, Kuwait made up the most ground as it recorded an on balance figure of -25.8 per cent, gaining 34.2 per cent on part one of the survey,'' Shuaa said.

"Bahrain, Qatar and Oman all improved by between 11.9 per cent and 19.8 per cent in the second half of December's survey. Interestingly, the view on current economic conditions in Saudi Arabia was relatively unaffected by the Nakheel sukuk repayment."


IN THE POSITIVE ZONE

In terms of sectors the forecast for the profitability of GCC consumer and retail, heavy industries, telecom, media, technology, transportation and logistics all remained positive, said the report.

"When surveyed for the second time in December, the telecom, media and technology sectors were expected to be the most profitable over the next six months, with an on balance figure of 32.3 per cent," it said.

All sectors, except consumer and retail and pharmaceuticals either improved dramatically or remained relatively the same. Telecom, media and technology, utilities and banks and other financial institutions all made strong gains and moved to on balance figures of 32.3 per cent, 25.8 per cent and -3.2 per cent. It said the investors expect all sectors, except real estate, construction and materials to either increase in profitability or remain relatively unchanged.

Investors said 2010 would be a Mena year from regional buy opportunity point of view. "The investor confidence returned quickly which shows the resliience of the markets. They have a confidence in the economy, which has strong fundamentals and are also positive on the outlook," added Schutzmann.

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