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Stocks overreacted to Egypt crisis

The Dubai bourse closed at 1,594.87 on Wednesday, up 3.31 per cent (FILE)

By Sunil Kumar Singh

The sell-off seen on the Dubai Financial Market (DFM) and other bourses across the GCC region in the aftermath of the unrest in Egypt was carried to excess and investors’ reaction was overdone, a senior official of EFG Hermes has said.

“I believe the decline was exaggerated and investors are realising it now and are buying stocks as they believe there is decent upside from current levels,” Chahir Hosni, Sales Manager (Mena equities), EFG Hermes, told Emirates 24l7.

Stock markets across the GCC were battered as the unrest in Egypt spooked investors who preferred to take their money off the table.

DFM-listed companies such as Emaar Properties, Arabtec, Drake & Scull International, Air Arabia, etc having operations in Egypt had been posting declines for the last few sessions.

However, these stocks were among the top performers on Wednesday.

Emaar jumped 5.81 per cent, Air Arabia rose 3.44 per cent, Drake & Scull International 6.06 per cent, and Arabtec rose 4.85 per cent on Wednesday.

Overall, the DFM closed at 1,594.87, up 3.31 per cent.

Abu Dhabi Securities Exchange also closed 0.96 per cent up at 2,624.31.

“Anxiety seems to be fading away in the UAE and the GCC markets. Firms that have exposure to the Egyptian market are also correcting from the over-exaggeration of the sell-off seen during the previous sessions,” he added. 

Hosni said the main reason behind the decline in the stock markets across the region was the concern over the situation in Egypt.

“On Tuesday the reported announcement by the Egyptian President to step down in September put a bit more clarity on the situation in Egypt. Also, given that the market was trading at very low multiples and on very low volumes, the market witnessed a rebound on the improved situation in Egypt,” Hosni added.

Increase in global crude oil price was another positive factor that provided support to the good performance of markets across the GCC, he said. Brent crude oil price hit $102.08 on Tuesday.

“I think the market here has a lot of room to move on the upside, as a lot of the issues got cleared now and this relatively clears the way going forward. I believe the worst is behind us, and eventually investors will turn more bullish, it’s just a matter of when,” he said. 

index rises 0.2 per cent to 6,819 points, easing from Tuesday's six-week low.

Qatar's index eases 0.02 per cent to 8,739 points. It is up 6.8 per cent since a Dec. 2 FIFA vote chose Qatar to host the 2022 soccer World Cup and outperformed regional peers in 2010.