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Foreign Money to Boost UAE Shares in Q4

Foreign investors or non-UAE nationals last week bought Dh1.986 billion worth of shares on the Dubai Financial Market and sold Dh1.738 billion, making a net foreign investment of Dh248.4 million. The transactions comprised 40 per cent of the total value of stocks traded during the week, said Dubai bourse operator Dubai Financial Market PJSC, which is the only listed exchange in the Gulf Cooperation Council.

Analysts said that with most local players on the sidelines throughout the holy month of Ramadan, foreign investors have been picking up the slack in anticipation of a rally in the fourth quarter.

The steady accumulation of shares by foreign investors has pushed the Dubai index back to the psychologically important level of 2,000, which it achieved on June 4, closing at 2,025.55 points. On Thursday, the last trading day of the week, Dubai shares rose for a sixth straight session, ending 1.5 per cent higher at 2,040.18 points to gain 6.2 per cent from the previous week.

“We can already see that some of the major foreign funds are starting to build positions as they anticipate better-than-expected third quarter results. A confirmation of the results will bolster buying,” said Vyas Jayabhanu, the Abu Dhabi-based head of investments at Al Dhafra Financial Brokerage. Participation by foreign investors has been noticeable in the last three weeks, he added.

The current situation bears some similarity with the fourth quarter of 2007, when stocks rose steadily, said Haissam Arabi, chief executive officer at Gulfmena Alternative Investments.

“The major difference though is that foreign institutional buying seems to be outplaying speculators,” Arabi said.

The Dubai bourse operator said that the value of stocks bought by domestic institutional investors last week reached Dh1.2 billion, or 24.4 per cent of the total value of stocks traded during the period. The net institutional investment reached Dh443.4 million.

Foreign buying, according to Arabi, has been largely “structured,” signalling that investors are looking at UAE equities for the longer haul, in contrast to the short-term horizon of day traders.

“This is actually a very positive sign,” he said. “Buying by foreign funds has been very gradual, so we are not seeing stocks flying, but creeping up steadily. That’s why when liquidity returns to the market after Ramadan, some investors are not going to find a lot of available stocks. Current supply will start drying up.”

The tendency would be for shares to rise further as investors scramble for limited stocks, especially those that are seen to be undervalued, such as bank and real estate shares.

Arabi said that encouraging global economic data that has been boosting sentiment in equities markets would also perk up regional markets, especially in Dubai and Abu Dhabi, which are among the most undervalued markets in the GCC.

The latest business survey released on Thursday by the US Federal Reserve implied that the recession is at its tail-end and that the world’s largest economy is poised for growth. Oil prices, a key indicator of economic health in the UAE and Gulf region, are trading above $71 a barrel.

On the home front, reassuring statements by His Highness Shaikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, that the government would meet its $4.52 billion worth of debts maturing this year, is also boosting sentiment.

“What we can expect is the beginning of a new cycle. Smart money is coming back in as foreign investors are positioning early for another wave of rally towards the end of the year,” Arabi said. “The GCC economies are also seen to turning around much quicker, along with frontier emerging markets.”

rocel@khaleejtimes.com