UAE equity markets to rally after volatile 2018, says FAB

Higher oil prices, weaker dollar and Abu Dhabi stimulus to boost markets this year

Dar Takaful's shares closed 6.6% higher at 61 fils per share on the Dubai Financial Market on Sunday as it announced a Dh215m acquisition of two Noor Takaful business units. Christopher Pike / The NatShow more

UAE equity markets are expected to rally in 2019 as the US dollar weakens and the economy gains a boost from Abu Dhabi’s stimulus package and Expo 2020, said the country’s largest lender by assets, FAB (First Abu Dhabi Bank).

"We predict a banner year for the UAE,” said Alain Marckus, managing director and head of investment strategy and management for FAB’s Global Asset Management unit.

“A less hawkish [US Federal Reserve], a weakening dollar, and Expo 2020 – all of these factors suggest a bullish Dubai, while the Emirate will also benefit from the Dh50 billion stimulus package set to be rolled out by Abu Dhabi this year,” he said.

The major shift in 2019 is the less-constructive outlook on the US dollar, FAB said in its Global Investment Outlook, published on Tuesday. “As a result, we are anticipating good returns from emerging markets in 2019, including the Middle East, as they benefit from a weaker dollar,” Mr Marckus added.

After a three-year oil price downturn, which rattled regional and global markets, Sheikh Mohamed bin Zayed, the Crown Prince of Abu Dhabi and Deputy Supreme Commander of the Armed Forces, announced the Dh50bn stimulus last June, intended to grow the private sector and encourage greater investment in the UAE.

Last year, the price of oil averaged $72 – but fell about 30 per cent over the last three months of 2018 to around $50. It is likely to recover to the higher range in 2019, as the US dollar gives up some of its gains, according to FAB’s outlook.

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At the same time, the world’s biggest economies are expected to post stronger GDP growth this year, with positive implications for global stock benchmarks. This will further aid local markets, particularly following Saudi Arabia’s inclusion in the MSCI emerging market index last summer, the report said.

“[Last year] was a volatile year for global markets, whereas 2019 is expected to deliver good, steady returns,” Mr Marckus said. “The US economy is growing at an above average rate since the global financial crisis with monetary policy still favourable.

“All of this means 2019 looks a lot brighter.”

However, some volatility is likely to continue this year as interest rates rise following a decade of exceptionally low levels, the report said. This will, nonetheless, provide good investment opportunities for some.