Debt market should appeal to investors

Financial advisers say there has been a return of confidence

Financial advisers in the Gulf are increasingly recommending that their clients buy into the region's debt market, particularly Dubai's. With the UAE's equity market waning, it is easy to see why investors are chasing equity's less attractive sibling, bonds. Deutsche Bank expects fixed-income pricing on Dubai and Dubai Inc to improve over the next six months as the risk of default falls.

Jamil Hallak, Deutsche Bank's regional head of credit trading, says Dubai Holding's 6 per cent notes maturing in 2017 and dollar bonds issued by DP World are a buy. The numbers are compelling. The HSBC NASDAQ Dubai Listed Conventional Total Return Index of six Eurobonds sold by Dubai companies and banks surged 17 per cent this year through to Tuesday. Last year, that index rose 21 per cent. Investing in Dubai's sovereign debt requires less due diligence than investing in government-related entities,such as Dubai World, which continues the process of restructuring part of its debt.

Still, it is evident that for many, the worst has passed. And only a few details in the Dubai World process still have to be smoothed out. Confidence in the market has strengthened because the Dubai and Abu Dhabi governments have stepped in and the Central Bank has put money into the financial system. In many ways, this region is still susceptible to harm from negative sentiment spilling over from global markets, but there are signs that this sensitivity is declining.