Bounce nothing to be buoyant about

Analysts see further pressure on the region's exchanges as selling is forecast to return

Bright spot: the Dubai property company's stock is an attractive choice for investors looking for cheap stocks this week. Randi Sokoloff / The National

While markets rallied late last week after heavy selling pressure, the recovery is not expected to last. "The latest bounce [on the Dubai Financial Market (DFM) General Index on Thursday] may extend in the very short term but selling is expected to return and put further pressure on the market," said Adel Merheb, the technical analyst at Shuaa Capital based in Dubai.

The DFM fell 4.4 per cent lower to 1,605.22 for the week, while Abu Dhabi Securities Exchange (ADX) General Index closed 4.2 per cent lower at 2,641.10. Mr Merheb added that, for ADX's measure, "the potential short-term rebounds is possible but they will represent counter-trend moves and, hence, should be followed by renewed selling pressure". Rami Sidani, the head of MENA investments for Schroders Fund Management based in Dubai, said global factors continued to dictate and mirror the region, and there had been little discrimination between a good and bad stock.

"However, the recent corrections have offered great entry points into some value stocks for long-term investors," he said. The fund manager's top pick is Emaar Properties, the Dubai developer, as he sees it as a cheap yet valuable stock. He said the market had not been fair in pricing the sustainable recurring income generated from malls and hotels. On Thursday, sources told Reuters that Saudi's Emaar Economic City, which is affiliated to the Dubai developer, would receive a loan of 3 billion Saudi riyals (Dh2.93bn) this year from the finance ministry.

In response, Emaar Properties surged 1.7 per cent last Thursday to Dh3.15 per share. Nevertheless, Mr Sidani said investors should think long term. "Investors shouldn't be distracted with the short term and focus on noise coming from the global financial market," he said. "As long as the focus remains on the market's long-term view, they should expect strong returns when positioned in the right equities."

Last week, property stocks in the UAE fell the most on Tuesday as the world markets plunged. They managed to recover their losses by the end of the week, however. In Dubai, Emaar Properties fell 7.5 per cent to Dh3.41, Deyaar Development dropped 10.5 per cent to Dh0.34 and Union Properties fell 8.6 per cent to Dh0.42 for the week. In Abu Dhabi, Aldar Properties dropped 9.8 per cent to Dh3.22, and Sorouh Real Estate fell 4.9 per cent to Dh2.11 for the week.

Egypt, one of two markets to be granted emerging markets status by the analysts MSCI Barra, will be the bright spot of the year, said Alfred Fayek, the managing director of institutional equity sales at EFG-Hermes in Dubai. The upgrade is in acknowledgement of its performance throughout the year as well as its depth and ability to attract foreign investment to its markets. The Egyptian stock exchange is working on creating the framework for index-linked funds, which Mr Fayek said would pour more inflow of investment into the market, and boost Egyptian stocks.

The EGX 30 index performed 0.8 per cent lower for the week, ending at 6,337.51. Overall, the index has performed 2.07 per cent higher this year to date. The Saudi Arabia Tadawul All-Share Index fell 6.5 per cent to 5,862.31 for the week, while Qatar's QE index closed 4.1 per cent lower at 6,683.02. Oil fell to below US$70 a barrel early in the week, affecting petrochemical stocks sharply, before it recovered. Mr Fayek said he expected oil to average about $70 a barrel, which should bode well for stocks such as Saudi Basic Industries Corporation (SABIC) and Industries Qatar (IQCD). SABIC closed the week 9 per cent lower at 80 Saudi riyals, while IQCD closed the week 4.3 per cent lower to 96 Qatari riyals.

Elsewhere in the Gulf, Bahrain's gauge fell 2.5 per cent to 1,453.82. Oman's main measure closed 1.7 per cent lower to 6,307.21 for the week. Kuwait's index, meanwhile, dropped 2.6 per cent to 6,997.30. [e-mail]