5 UAE stocks to buy in 2014?

A Bahrain-based brokerage services firm has created a list of its 20 favourite shares across five key Mena markets, including five large-cap shares from the UAE.

Mubasher Financial Services said in a media statement that its equity research arm, MubasherTrade Research, has created a “Mena Favourite List,” which highlights its top investment ideas across the region.

In the UAE, the analysts have identified two banks, two property developers, and a logistics firm, which are among the 20 Mena stocks across five markets that the brokerage has identified as its favourite stock picks.

The chosen stocks are Aldar Properties, which is up 115.84 per cent in the preceding 12-month period; Abu Dhabi Commercial Bank (ADCB), which is up 101.87 per cent in the same period; Emaar Properties, up 108.93 per cent; First Gulf Bank (FGB), up 78.01 per cent; and Aramex, up 56.17 per cent.

Even as these stocks – and quite a few others – have surged substantially over the past year, the fact that the UAE and Qatar will be included in the MSCI Emerging Markets Index beginning May 2014, as well as the fact that regional economies are back on track and are expected to clock healthy GDP growth rates in 2014 mean that the potential of stocks to rise further remains good.

Additionally, with Dubai bagging the rights to host Expo 2020, analysts expect property developers and construction firms in particular, and the market in general to benefit from the positive sentiment going into 2014.

“We expect traded values to improve in 2014, particularly in Egypt (provided political stability is restored) and in Qatar and the UAE (with the effective inclusion of both markets in MSCI Emerging Markets Index “MSCI EM” mid-2014),” said Amr Hussein Elalfy, CFA, Global Head of Research at MubasherTrade Research.

“Meanwhile, Saudi Arabia will continue to have the lion’s share of Arab markets’ equities traded values with further upside expected whenever the market is opened to foreign investors. Consensus estimates suggest double-digit earnings growth in 2014 (Egypt +20%, Qatar+14%, Saudi Arabia +19%, and the UAE +10%),” he noted.

The other stocks in its Mena Favourite list are:

Egypt (7 stocks):

• Arab Cotton Ginning, CIB, EFG Hermes, Global Telecom, National Maize, Telecom Egypt, TMG  Holding

Jordan (1 stock):

• Arab Bank

Qatar (3 stocks):

• Commercial Bank of Qatar, Ooredoo, Qatar Electricity & Water

Saudi Arabia (4 stocks):

• Mobily, SABIC, SABB, Saudi Ceramics

MubasherTrade’s recent research note highlights that Arab equity markets’ performance in 2013 suggests a re-rating against the backdrop of strong economic growth and abundant liquidity within the region.

Economic growth averaged +4.6% for the Middle East in 2012, led by Saudi Arabia (+5.1%) and Qatar (+6.2%), thanks to stable high oil prices that drove investments. This compares favorably to a world average of +2.2%. However, compared to a year ago total equities traded values dropped 18% in 10M 2013 to USD433bn, mainly because of Saudi Arabia and Egypt (-32% and -34% to USD309bn and USD9.9bn, respectively), according to the report.

Excluding both markets, equities traded values almost doubled (+93% YoY) in 10M 2013 to USD114bn, led by the UAE (+201% to USD51bn) and Kuwait (+71% to USD36bn). In 2014, economic forecasts suggest low- to mid-single digit economic growth rates in the Middle East, led by Qatar’s +5.2%, Saudi Arabia’s +4.5%, and the UAE’s +3.6%. Yet, these growth rates are much higher than the world’s +2.8%.

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