Investors in Dubai spur a new high for market

Dubai's stocks surged to the highest in more than a year yesterday. Nikhil Monteiro / Reuters

Dubai's stocks surged to the highest in more than a year yesterday as retail investors flooded back to the market after signs of recovery in the global economy.

The benchmark Dubai Financial Market General Index has rallied by almost 30 per cent in the year to date, helping stocks erase losses from the sell-off triggered by last year's Arab Spring.

During yesterday's trading, the benchmark added another 3 per cent to reach 1,754.20, its highest level since November 1, 2010. In the capital, the Abu Dhabi Securities Exchange (ADX) General Index also climbed, rising 0.6 per cent to 2,641.29.

"The improving global economic outlook brings positive confidence in the market. You wouldn't see as an aggressive a rally [without] global markets coupled with low valuations and high yields," said Saleem Khokhar, the head of equities at National Bank of Abu Dhabi.

The rally caps a turnaround in the fortunes of Dubai's market after a run of low trading volumes and poor valuations in the second half of last year. Unfolding political uncertainty in parts of the region combined with a constant flow of gloomy news from the euro zone and the US to scare investors away.

But global sentiment in recent days has been brighter, helping to underpin a surge in markets.

Euro-zone leaders emerging from a two-day summit in Brussels on Friday expressed optimism that the worst of the crisis was over. Across the Atlantic, data showing more Americans than forecast were buying previously owned homes and a dip in jobless claims to a four-year low helped Standard & Poor's 500 Index end its best February in 14 years.

Upbeat global news together with improving company earnings and dividend payments locally have helped to tempt back investors, say analysts.

"The real indicator is we've seen people go back into the stock exchange pit," said Haissam Arabi, the chief executive of Gulfmena Investments in Dubai. "From 2005 to 2008 you couldn't move down there.

"Then from 2008 to 2011 you could hear a pin drop and see the tumbleweed roll by. Now people are back to visiting the floor. It is a good sign retail investors are back."

Arabtec, a construction firm, was one of the best performers in Dubai, with its stock climbing another 2 per cent to bring its gains for the year to 125 per cent.

Some analysts have expressed concern about the pace of the rally. "Now it is becoming dangerous. You can't have small companies up 100 per cent in just a few weeks. [It is] not about underlying fundamentals, but pure speculation," said Sebastien Henin, a portfolio manager at The National Investor in Abu Dhabi.

The advance in Abu Dhabi's shares means the index has now risen for 11 consecutive days. Shortly after the close of trading, the ADX announced the appointment of Rashed Al Baloushi as its chief executive.

He had previously served as the deputy chief executive but was acting head of the ADX after the departure in April 2010 of the former chief executive Tom Healy.

"We were pleased to select Rashed as chief executive of ADX," said Nasser Ahmad Al Suwaidi, the chairman.

"Rashed brings wide experience in growing markets. His strategic focus, together with his substantial business knowledge, will drive ADX onward."

Mr Al Baloushi has previously given his backing to a proposed merger of the ADX with the main Dubai bourse and has overseen plans for companies to list bonds and sukuk on the capital's stock exchange.

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