UAE stock markets set for 'multi-year bull run'

Shehab Gargash, the chief executive of Daman Investments, believes UAE stock markets have further to travel even after a world-beating rally and could yet have doubled by the end of this year.

Mr Gargash said markets in Dubai and Abu Dhabi, currently among the top five best performing this year, would soon embark on a "multi-year bull run", buoyed by a combination of international investment, increased bank lending for investments and a revival of initial public offerings. The UAE's markets have had a banner year, with the Dubai Financial Market General Index up 39 per cent so far this year, and the Abu Dhabi Securities Exchange General Index up 36 per cent during the same period.

But they could rise yet further, Mr Gargash added.

"I'll stick my head out - I'll not rule out a triple-digit year in one or two markets," he said, speaking at the firm's annual press conference in Dubai yesterday.

"That's how bullish we are on UAE equities."

Triple-digit returns would equate to capital gains of more than 100 per cent, which would mean substantially outperforming the market rally in the first six months of the year during the second half.

However, Mr Gargash tempered his prediction by warning that the UAE's markets tended to behave in an "absolutist" manner, adding that the constant replacement of the expatriate population meant that most investors had short memories and as a result would not heed lessons of past crises.

Stocks have rallied on the back of UAE companies' world-beating dividends and speculation that the Emirates and Qatar would be reclassified by MSCI, the index provider, to emerging markets alongside Brazil, Russia and China.

Both countries were upgraded last month after five failed attempts to secure inclusion. HSBC estimates that some US$800 million in passive investments will be funnelled into the UAE and Qatar automatically as a result of the countries becoming included in the index from May next year.

Not all banks are convinced of the bullish prospects for the Emirates.

Merrill Lynch and Credit Suisse both cut the UAE from "overweight" to "neutral" last month, saying stocks were looking expensive after a sustained rally.

Fixed income markets have also sold off heavily during the past two months as a result of indications of monetary tightening by the US Federal Reserve.

Mr Gargash said interest in the UAE's markets should be spurred by the arrival of greater sums of overseas capital, which in turn should spark the return of IPOs.

The UAE's stock markets have not had a new listing since 2011, although a number of companies including NMC Health, Amira Nature Foods and Al Noor Hospitals Group have listed on London and New York since then.

Plans for Daman Investments' own IPO remained on track but were not imminent, with a target of 2015, Mr Gargash added.

Companies including OSN, the pay TV network, Damac Properties and Senaat, previously known as General Holding Company, are all understood to be seeking listings.

Several energy firms, including Abu Dhabi National Energy Company, also known as Taqa, Dana Gas and Gulf Marine Services are also known to be seeking overseas share listings.

ghunter@thenational.ae