The UAE stock markets may have been heading lower over the past few weeks due to a decline in oil prices, but 2015 is expected to be a better year for the UAE bourses, particularly the Dubai Financial Market.
Mubasher Financial Services on Tuesday rated both the Dubai Financial Market and Abu Dhabi Securities Exchange ‘overweight.’
in its outlook for Mena equity markets in 2015, Mubasher predicted the DFM General Index to rise to 4,900 points while Abu Dhabi is forecast to touch 5,000 points at the end of 2015.
Both the UAE bourses on Tuesday ended the day in green. Dubai bourse closed at 3,814 points, rising 1.7 per cent, while Abu Dhabi closed the day 1.36 per cent higher at 4,510 points.
“Based on our estimated total return and taking into account each country’s rating, we are overweight Egypt, Saudi Arabia, and the UAE and neutral on Qatar. In terms of sectors, we are overweight consumer & healthcare in Egypt and Saudi Arabia; financials in Egypt, Saudi Arabia, and the UAE; industrials in Saudi Arabia and the UAE,” Amr Hussein Elalfy, Managing Director, Global Head of Research at Mubasher Financial Services, said in the report.
The persistent decline in the UAE stock markets has led to a hole in the investors’ pockets. And Mubasher Financial Services has announced its picks which could help investors recover some of their losses or make them richer depending on individuals picks.
In its list of 20 picks for 2015, Mubasher has rated 10 stocks ‘buy’ and the other half as ‘hold’ with a good upside potential for the investors.
The stocks that the firm has rated as ‘buy’ at current prices are: Etisalat, Air Arabia, Dana Gas, Agthia, Abu Dhabi Commercial Bank, Emaar Properties, First Gulf Bank, Aramex, Eshraq Properties and Dubai Investments Co.
On the other hand, it rates Arabtec, Drake & Scull International, Dubai Financial Market, RAK Ceramics, Union Properties, Du, Emaar Malls, Aldar Properties and Deyaar among the ones to ‘hold’.
Between them, the stocks which could give the UAE investors highest possible returns are mainly property stocks suggesting that the UAE’s listed real estate companies are poised for strong growth this year.
Investors holding stocks of Union Properties and Eshraq could see their returns more than double this year with an upside potential of 147.9 per cent and 145.1 per cent, respectively, according to Mubasher.
Among others, Dubai Investments Company, Emaar Properties, Dana Gas, DFM, and DSI have the upside potential to give investors profits of 88, 82.9, 78, 61.2 and 52.3 per cent, respectively.
The rest of the stocks identified by Mubasher are expected to offer returns below 50 per cent, it notes.
Look for bargains
With most Mena markets still driven by retail investors, margin calls usually create supply overhang whenever equity markets try to recover, it says.
“We believe this risk is mostly behind us. Technically, GCC markets (namely Saudi Arabia and the UAE) have entered a bear market, defined as a 20 per cent drop off the previous peak. In view of the big macro picture that is conducive to growth, we think this can be a bear trap and hence advise investors to look for bargains,” said the Mubasher analyst.
“We believe timing the market is very difficult, if possible at all. Thus, it is imperative that investors are ready to adjust nimbly and avoid making irrational investment decisions driven by the herd mentality, and pay more attention to the big picture (global, regional, and local),” he added.
“In other words, investors need to cut out the noise of the day-to-day trading that has led to heightened volatility. Thus, at times when markets drop to abnormally low levels, investors should think of this as the start of their shopping season. If investors are ready with their favourite list of stocks to shop at such hard times, they will more likely end up as winners if they keep a balanced and reasonable risk-reward trade-off,” he said.
Oil price recovery in H2 2015
According to Mubasher analysts, Mena equity markets will remain captive to oil price moves, but the correlation should weaken as investors get accustomed to lower oil prices.
Amr Hussein Elalfy predicted that the market consensus seems to agree that the year 2015 will be a story of two halves with low oil prices in the first-half of 2015, followed by recovery in the second half. It forecast Brent crude at $73 by end of year.
“Market sentiment is now more accustomed to seeing low oil prices and even lower – as long as we are still in H1 2015. We tend to agree with market consensus that H2 2015 will be the better half of the year for oil markets. Notwithstanding external shocks, we should see the mean-reversion theory manifest itself in oil markets eventually,” Elalfy added.
Disclaimer: The equities mentioned and the investment advice provided by Mubasher Financial Services 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.