Regional stock markets followed the positive mood from the US and Asia on Tuesday, rallying in reaction to a US Treasury announcement to rid bank balance sheets of bad assets.But brokers stressed that UAE stocks also rose as investors continued their tentative buying spree. "We were starting a small rally on our own behalf and it helped to have good news [from the US]," said Mohammed Ali Yasin, the managing director at Shuaa Securities.
"More and more investors believe we have lived or are living through the bottom, so that this could be a good time to come into the market." Stocks on the Dubai Financial Market (DFM) ended the day up 4.13 per cent. They were outshone, however, by the Abu Dhabi Securities Exchange (ADX) index, which closed 4.49 per cent higher, its biggest one-day gain since January. The impetus came from the US Treasury secretary, Timothy Geithner, who on Monday revealed details of the administration's public-private investment programme, which outlined ambitious plans to buy up soured assets and loans.
Wall Street was cheered by the programme news, with the Dow Jones Index rising almost 7 per cent on Monday. Yesterday, most Asian indexes rose by more than 3 per cent, with both Japan's Nikkei index and the Hang Seng in Hong Kong hitting two-and-a-half month highs. But by the time Gulf markets had closed, European indexes were looking shaky, with London in particular hit by fears of inflation. However, property companies such as Emaar Properties, Aldar and Sorouh, which have been languishing, profited from the better mood. "They were the most vulnerable all along. It is only logical that what goes down the most comes up the most," said one Dubai fund manager.
Aldar, the developer of Abu Dhabi theme parks such as Ferrari, had its biggest one-day gain since October, closing at Dh2.74, up 9.6 per cent. Aldar's rise reflected that of the entire sector. Property companies on the DFM ended the day up 9.6 per cent, with the bellwether, Emaar, up 10.5 per cent. Banking stocks also benefited from the mood of optimism. Dubai Islamic Bank (DIB) rose 10.28 per cent to close at Dh2.69. In a statement to the bourse, the company said it would discuss at its board meeting today "the possibility of a Dh3 billion (US$816.7 million) capital increase over five years". .
Many UAE banks have already converted, or are planning to convert, recently received government deposits into Tier 2 capital. This will boost their capital adequacy ratio, which the Central Bank Governor said he wanted raised to 11 per cent this year, and 12 per cent next year. Analysts say DIB may want to prepare for all eventualities. "UAE banks are not in desperate need of recapitalisation at the moment. But this could be done to strenghten their position in case of continued deterioration of the economic environment," said Robert Thursfield, the director of financial markets at Fitch Ratings in Dubai.
Etisalat the telecommunications provider gained 8 per cent to close at Dh13.50 after its shareholders approved a Dh0.35 dividend for the second half of last year and the allocation of one free share for every five held. Elsewhere in the region, Qatar's main index rose 5.88 per cent to close at 5,244 points. Qatar National bank added 9.54 per cent and Qatar Islamic Bank gained 6.35 per cent. The exception of the day was Kuwait, where shares were dragged lower by the country's political stalemate. Its index closed 0.2 per cent lower at 6,759 points after the cabinet failed to pass two laws aimed at reinvigorating the economy.
Muscat shares showed slight gains and ended the day up 0.72 per cent, partially buoyed by the higher oil price. Crude oil prices are up 20 per cent on the year. Saudi Arabia's Tadawul All Share Index rose 2.1 per cent. Investors will be hoping that the rally will continue. For this to happen, analysts say another good session on Wall Street is required. uharnischfeger@thenational.ae
