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Rosy outlook set to drive stocks rally

By Matt Smith



A rosy economic outlook will drive a UAE stocks rally in the medium term, say analysts.

This year has been a rocky time for the domestic exchanges, with mega corporate results failing to spark any significant gains.

That could be about to change, however, with both the Dubai and Abu Dhabi indices finishing Thursday strongly to claw back much of the early-week losses.

“All the factors are positive for the GCC markets,” said Rayan Salam, Algebra Capital portfolio manager. “The price of oil remains high and these revenues are trickling down to the private sector through increased infrastructure spending. Reforms are liberalising the financial sector, while UAE companies have posted excellent corporate profits.”

However, in the immediate term, international turmoil could yet stop the UAE markets in their tracks, despite a US recession unlikely to have a significant effect on corporate earnings in the Gulf.

“It’s too early to say where the market is heading,” said Alaa El-Din Moustafa, EFG-Hermes chief dealer. “People remain confused and if the international markets take a turn for the worse, then the UAE indices will slow down,” he added.

Algebra’s Salam agreed: “There is greater correlation between UAE and global markets as overseas institutions become heavily involved, but the link remains pretty low.”

Overall, the Dubai Financial Market fell 0.73 per cent last week, while the Abu Dhabi Securities Market was virtually unchanged, closing down 0.09 per cent.

“The markets have ignored recent profit or dividend announcements, which is a surprise,” said Wadah Al Taha, Emaar Financial Services head of research.

Salam said foreign funds are poised to re-enter the UAE exchanges in a big way, after waiting for the corporate results season to be completed. These are likely to target the banking sector, which saw full-year profits jump 29 per cent in 2007, with only Abu Dhabi Commercial Bank, which had significant exposure to US sub-prime losses, failing to impress.