DUBAI // Regional equity markets yesterday recovered much of the previous day's losses as investors were drawn back by attractive valuations and speculation that the market is oversold. After posting the largest losses among the region's bourses on Sunday, Dubai led the rebound as the Dubai Financial Market (DFM) General Index rose 2.8 per cent to a three-week high of 1614.30. The gain was led by property, construction and banking stocks.
Emaar Properties, the largest listed developer in the region, closed the day 5.7 per cent higher, while Shuaa Capital, the country's biggest investment bank, advanced 3.5 per cent. DFM shares rose 7.6 per cent and the construction giant company Arabtec closed 6 per cent higher. Emirates NBD calculates that the UAE markets are severely undervalued, but cautions that some may not reach fair value before 2012.
"On pure valuation the market is 30 to 40 per cent undervalued," said Gary Dugan, the head of private banking at Emirates NBD. "Markets can rise but there has to be a huge shift in the local economic environment for that to happen." Saud Masud, the head of research at UBS, agreed there is a gap between valuations in regional equities and other emerging markets, but believes sellers will continue to outnumber buyers for at least the short term.
"The notion that markets are oversold is pretty speculative," Mr Masud said. The Abu Dhabi Securities Exchange General Index added 0.3 per cent, helped by gains in telecommunications and construction stocks. The Kuwait benchmark index advanced 0.9 per cent, followed by Qatar, which gained 0.7 per cent. Muscat and Bahrain added 0.6 per cent and 0.2 per cent, respectively. The Saudi Tadawul All Shares Index advanced 0.2 per cent.