Stock markets across the region rebounded strongly yesterday with Dubai leading the pack as investors snapped up cheap stocks after weeks of decline.
The turnaround came as a relief for traders as stock markets have lost US$140 billion (Dh514.23bn) in market capitalisation during the past five weeks of political unrest, according to data from an Arab Monetary Fund report.
The sell-off prompted traders to spot buying opportunities among undervalued companies in so-called "defensive stocks" - those that tend to remain stable under difficult economic conditions.
"Stocks like du, Emaar, Air Arabia are the ones that always have a cash flow on a daily basis and get bought in a down trend," said Amjad Bakir, the trading manager at Wafa Financial Services.
The Dubai Financial Market (DFM) General Index rose 2.7 per cent yesterday to 1,389.04 points as it tracked a recovery in Saudi Arabia's Tadawul, the region's largest and most liquid stock market.
It put the spotlight on key stocks in the emirate including Emaar Properties, the builder of the world's tallest tower, the Burj Khalifa. The company added 2.49 per cent to close at Dh2.47. Air Arabia was the most traded stock with more than 31 million shares changing hands. It closed 2.2 per cent higher at 78 fils. The engineering and contracting company Drake & Scull International climbed 2.5 per cent to 88 fils and Dubai Islamic bank gained its most in almost three weeks, rising 3.9 per cent to Dh2.10.
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The DFM has lost 15 per cent since Zine el Abidine Ben Ali was ousted as the Tunisian president in January. The Tunisian bourse has remained closed since then, but is expected to reopen today.
Saudi Arabia's Tadawul All-Share Index rallied 7.3 per cent on Saturday, the most since November 2008, snapping a 13-day losing streak. It closed up 0.92 per cent yesterday at 5,762.5.
But some market players were doubtful of how long the gains would be sustained.
"This is a temporary reprieve and you need the macro risks to subside to sustain a rise locally," said Shehzad Janab, the head of asset management and advisory at Daman Investments in Dubai.
Saudi Arabia's market has been trading at volumes of about 6bn riyals (Dh5.87bn) a day, significantly more than Abu Dhabi's Dh104.8 million traded yesterday and Dubai's Dh230.8m.
"[Saudi Arabia is] the one that people are worried about, so when that's up everyone follows," Mr Janab said.
Many stocks in the kingdom are trading at loweer price-to-earnings ratios than the average, particularly in the petrochemicals, retail and consumer-related sectors.
Most other Gulf markets also ended higher yesterday: the Abu Dhabi Securities Exchange General Index advanced 1 per cent to 2,558.28 points; Bahrain's BB All-Share Index rose 1.3 per cent to 1,395.72; Kuwait's measure climbed 0.7 per cent to 6,189.90; and Oman's stock market increased 0.8 per cent 6,403.62. Qatar's exchange was closed for a holiday.
"I've seen this kind of market a hundred times before," said Mr Bakir. "It's a normal rebound after such a fall in the past seven or eight weeks but it's unlikely to be sustained."
In North Africa, Egyptian stock trading remained suspended yesterday, after the bourse postponed plans to resume operations as Ahmed Shafik, the interim prime minister, resigned. The exchange said it would not reopen until discussions were completed with the incoming prime minister Essam Sharaf.
Tunisia's stock exchange said it would resume operations on March 7, according to a statement on its website. The market regulator suspended trading on February 28. The benchmark Tunindex has retreated 21 per cent so far this year.
With the exception of Egypt and Morocco, which are included on MSCI's emerging market index and taken together represent just under 1 per cent of the measure, most other regional markets are classed as "frontier markets", including Bahrain, Kuwait, Qatar, Jordan, Lebanon and Tunisia.
Some traders shy away from investing in such markets because of their volatility and instability but in the past week some of these markets have been the only ones to gain.
The Jordanian stock market ended yesterday 1.1 per cent higher at 2,238.92 points.
