Equity investors in the UAE and other Gulf nations are expected to recover part of the losses they suffered in 2008 as the local markets are likely to rebound in 2009 from their worst-ever year, stocks dealer said yesterday.
Although regional markets could still decline in early 2009, the drop will be relatively small and the bourses are projected to recover by mid year, when crude prices begin to pick up after losing more than $100 in late 2008.
"Our expectations are that the markets of the UAE and other Gulf countries will begin to recover in mid 2009 as there are international forecasts that oil prices will improve in the second quarter,"
said Humam Al Shamma, a financial advisor at the Abu Dhabi-based Al-Fajr Securities, a key UAE stockbrokers.
"As you know, any increase in oil prices will positively affect the local economy and the banking system and this will consequently have a good impact on the bourse. I believe there will be some falls in the local bourse in early 2009, then there will be relative stability in the second quarter. In the third quarter, we expect these bourses to start recovering. I think their performance through 2009 will be relatively good and much better than many other markets in the world."
Official figures showed the seven bourses in the UAE and the other GCC countries plunged by more than $450 billion in 2008, their largest annual loss since they began share dealing.
Officials and experts have cited several factors, including the global financial crisis, massive foreign sell-offs, speculation, rumours and other factors.
"I can tell you that 2008 wins with excellence as the worst year for the UAE bourses and other GCC markets," said Zuhair Kaswani, Director of the Sharjah-based Al-Sharhan Securities, another key UAE stockbroker.
"As for 2009, my expectation is that shares will decline but not as much as they did in 2008. There could be three to five per cent declines but on average, the local markets will end the year higher than the level at the end of 2008. The reason is that they have dipped to levels that seem to constitute a floor. In general, I think 2009 will be much less worse than 2008."
Figures by the Abu Dhabi-based Arab Monetary Fund, which tracks regional bourses, showed the UAE's Dubai and Abu Dhabi stock exchanges lost a $132bn during 2008 after gaining nearly $93bn in 2007.
From around $257bn at the start of 2008, the combined market capitalisation of the two bourses plummeted to nearly $125bn at the end of the year.
The plunge depressed their ratio from 19.9 per cent of the total Arab market capitalisation to around 15.4 per cent in the same period.
The AMF report showed its index for the two bourses also dived by 63.7 per cent in Dubai and 62 per cent in Abu Dhabi, one of the largest falls in the region.