Dubai's main equity benchmark rose for the seventh consecutive session yesterday, making it the world's best performing stock exchange so far this year. The property developer Emaar led gains.
The emirate's key measure has rallied 10 per cent in the past week to bring its overall gains this year to 29 per cent, the best performing measure of primary equity indexes tracked by Bloomberg. Shares of Emaar have gained 29 per cent, too, mostly since the company announced on March 15 its intention to press ahead with long considered plans to list 25 per cent of its retail and malls division.
“The most important driver was Emaar planning to IPO some of their recurring revenue from their retail and hospitality and paying a special dividend from that IPO,” said Simon Kitchen, a Cairo-based strategist at the Egyptian investment bank EFG-Hermes. “The UAE’s relative safety in emerging markets has also helped.”
Dubai's stock measure more than doubled in value last year as the UAE's economy grew more than 4 per cent. The UAE has also emerged as safe haven in the developing world universe because of its strong economic fundamentals, such as a current-account surplus and a US-dollar pegged currency. The benchmark MSCI Emerging Market Index has dropped 5.8 per cent this year amid turmoil in countries including Russia and Turkey.
While some money managers, such as BlackRock, have voiced concern about overheated valuations in the UAE, Mr Kitchen said EFG-Hermes remained upbeat on the Emirates. The bank had a positive outlook on Emaar and bank stocks, but Mr Kitchen warned there may be volatility ahead because of stock purchases made on borrowed money, a popular activity among retail investors in the region.
“One thing you have to keep an eye out on is the high level of turnover in the market, and there’s also quite a bit of margin lending, which means that you would expect these markets to be volatile and we may continue to see that,” he said.
mkassem@thenational.ae
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