UAE stocks significantly undervalued: survey

Shuaa Capital's Investor Confidence Survey finds DFM and ADX shares are seen as undervalued.

Stocks on the Dubai Financial Market (DFM) and the Abu Dhabi Stock Exchange (ADX) are seen as undervalued by GCC investors, said a survey.

Almost one-third of respondents said there is potential for a rebound on the DFM as stocks remain undervalued, Shuaa Capital's GCC Investor Confidence Survey said.

More than 31 per cent of investors surveyed said the ADX is also positive and is significantly undervalued.

The Saudi Stock Exchange holds potential for investment opportunities in undervalued stocks with an on-balance figure of 13.9 per cent.

However, the Shuaa Capital GCC Investor Sentiment Index dipped by a marginal 5.7 points in May, although it is still in positive territory at 107.4. In what was a difficult month for the global economy, May saw all Shuaa Capital GCC Investor Sentiment Indices decline.

Leading the slide was the UAE Index, which slipped 14.7 points to 104.7. Qatar also recorded a significant decline as it dropped from 131.9 points in April to 121.9 points in the latest survey.

The GCC Investor Sentiment Index and all sub-indices have a range between 0 and 200. A number greater than 100 represents positive sentiment, while a number lower than 100 represents negative sentiment.

Sameer Al Ansari, Chief Executive Officer of Shuaa Capital, said in the report: "While we saw progress made on the Dubai World situation in May, there is still a number of other issues restricting investor confidence. Europe is going through an economic crisis at the moment and with GCC economies heavily influenced by the West, it comes as no surprise that regional confidence has been dampened."

Oman and Saudi Arabia sustained moderate declines as they fell to 107.3 points and 123.6 points respectively.

Meanwhile, Kuwait and Bahrain indices moved below the 100-point threshold, indicating overall negative sentiment. After two months of improving sentiment, Kuwait and Bahrain indices are now at 97.9 points and 98.6 points.

One of the main components of the Shuaa Capital GCC Investor Sentiment Index is investors' six-month outlook for economic conditions in the region, which remains healthy at 16.7 per cent on balance.

The Shuaa Capital GCC Investor Confidence Index and its sub-indices for all six GCC countries are derived from an equal weightage of responses to four questions of the GCC Investor Sentiment Survey: current view and six months' outlook on economic conditions, current view and six months' outlook on equity market valuations.

All GCC markets remained in positive territory, when looked at individually. About 33.3 per cent of investors surveyed in Qatar were positive about the GCC economic outlook, while it's 31.9 per cent in Saudi Arabia, 9.7 per cent in the UAE, 18.1 per cent in Oman, 6.9 per cent in Kuwait and 8.3 per cent in Bahrain. This comes despite declines in every market being surveyed in the April survey. Internationally, Global Emerging Markets dropped 24 per cent in April to 13.9 per cent, while Bric countries slipped to 12.5 per cent on balance.

Oliver Schutzmann, Author of the Investor Sentiment Report and Chief Communications Officer of Shuaa Capital, said: "Despite a decline in the Shuaa Capital GCC Investor Sentiment Index, the six-month outlook for economic conditions in the region very much indicate that the situation is set to improve."

Looking ahead six months with regards to stock markets, investors expect the ADX and Saudi Stock Exchange (Tadawul) to rise the most, with on-balance figures of 27.8 per cent and 34.7 per cent respectively.

Comparatively, European stock markets are expected to struggle and decline in price, with Eurostoxx 50 and FTSE recording on-balance figures of -6.9 per cent and -4.2 per cent in this latest report. Meanwhile, investors have indicated that Dow Jones 30 companies will see stock prices increase with an on-balance figure of 15.3 per cent.

"Another positive sign on the route towards economic recovery was the special question, which asked investors whether they believed trading activity would increase over the next six months. Participants said they thought most regional markets would see an increase in trading volumes," he said.


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