The resurgent UAE stock markets are poised to resume their bull run as analysts predict a spectacular 2008. “Next year will be a very positive year for the equity markets,” said Mohammed Ali Yasin, Emirates Securities managing director.
“International institutional investors will be looking at the UAE, and the financial performance of listed companies supports this view.”
With bumper earnings anticipated for this year, there is little to disrupt the rosy outlook. Some caution is, however, advised. Yasin said: “There are a lot of things that can happen in a year, so it’s difficult to predict the future fate of the markets. What will happen to the dollar peg? Will the geopolitical tensions in the region intensify? But if companies can maintain their year-on-year growth, the market is ready to continue the uptrend.”
Chahir Hosni, EFG Hermes sales manager, claims the future is bright for UAE stocks, predicting a strong rally in the new year.
“Given the growth in gross domestic product and corporate earnings, we are only at the beginning of an uptrend,” added Rayan Salam, Algebra Capital portfolio manager.
“Going forward we anticipate a price to earnings ratio of just below 12 times in 2008, with the UAE remaining one of the cheapest markets in the emerging market spectrum. There’s very little that could alter this forecast. The government budget is set well below current oil prices, so the economy will be cushioned against any fall in oil revenues.”
Few analysts will make concrete predictions of how they think UAE equities will perform next year, but Walid Shihabi, Shuaa Capital’s head of research, believes the markets could gain 30 per cent in 2008.
Sherif Abdul Khalek, Al-Futtaim HC Securities dealing room manager echoes this view.
“The quality of investors is much improved and economy is looking very promising so there’s almost no stopping the markets,” said Khalek.
“We’re very optimistic in the short and medium term, while long-term prospects are even better. “By the middle of next year I think the markets could be up 25 to 30 per cent,” he added.
This would place the Dubai index above the 7,000 level, while Abu Dhabi could touch 5,600, although reaching these levels would trigger a correction, Khalek warned. However, this fall would only fuel a rebound to the figures mentioned above.
“Next year stock trading will depend on the imminent full-year results, which will begin to trickle in from mid-January,” said Mohamed Alami, Naeem Shares and Bonds relationship manager.
“If they exceed expectations then the market will take off, but if results are as expected it will take a couple more weeks to get going. Stocks want to reach new levels, but these must be based on results so for some the sky is the limit, while for others it may be a struggle.”
The restrictions on foreign ownership could limit the market’s growth, however, with no more than 49 per cent of a company’s shares permitted to be in non-UAE hands.
Brokers also expect major property players and construction firms to hog the limelight in terms share trading volumes in 2008.
Brokers have expressed cautious optimism based on availability of liquidity, low interest rates, high oil price, expected growth in corporate profitability and the influx of foreign investment into the markets.
They expect the real estate and construction sector to claim the largest share of trading and say that the stock markets are preparing to enter a new period of growth.
Jamal Ajaj, Director of Al Sharhan Shares Center in Abu Dhabi, expects the year 2008 will see unexpected percentages of trading movement.
He said signs of the growth started to emerge in October and November, when there was 25 per cent growth in share trading.
Ajaj pointed to the indirect impact of regional stock markets on the UAE markets, especially the Kuwaiti and Saudi stock markets. The improvement in these markets is positively reflected on the local market. “The services and real estate sectors will take the biggest percentage of trading,” he said.
Hamoud Al Yasi, General Manager of the Emirates International Securities, said: “I think 2008 will see an increase in the prices of shares. This will be stimulated by growth in the profits of companies, strong economy and low banking interest rate.”
He added the availability of liquidity, whether it was local or foreign, along with the high demand and low supply will help share prices rise.
He said 2007 witnessed 42 per cent growth in the DFM, with the biggest percentage of trading in October and November. He expected 2008 growth to be more than 20 per cent.
Haitham Arabi, Managing Director of Shuaa Capital, said the falling value of the dollar and the resultant availability of foreign liquidity will drive the UAE markets.
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