UAE investors are hoping that equity markets return to normality today after the turbulence of the past week, as trading opens against a more positive backdrop of global economic indicators.
Stock markets in Dubai and Abu Dhabi experienced their worst one-day falls of the year last Sunday, opening down 6.96 per cent and 5.01 per cent respectively, amid global economic uncertainty over plunging Chinese shares and declining oil prices.
However, UAE equities recovered to emerge relatively unscathed at the end of the week – Dubai's headline index ended the week down 1.7 per cent, while Abu Dhabi's benchmark index dropped 1.1 per cent.
Even so, a handful of blue-chip stocks – including Aramex, Arabtec Holding, Aldar Properties and Abu Dhabi Commercial Bank – ended the week comfortably in positive territory.
“Markets go down, but it doesn’t last forever,” said an Emirati retail investor in Abu Dhabi.
“Prices have come down a lot, and now banks and financial institutions are buying shares at a low price. Oil’s returned to a better price, so inshallah it will be better now, even if it takes a few months to get back to where it was.”
Although UAE markets opened last Sunday against a backdrop of global stock market corrections and tumbling oil prices, the picture now is a lot more positive. The Shanghai Composite Index, which triggered global panic selling last week, rose 10.4 per cent across Thursday and Friday.
In New York, the Dow Jones Industrial Average, which closed virtually unchanged on Friday, ended the week in positive territory.
Of even greater encouragement perhaps is the price of oil, which rallied on Thursday and Friday after hitting six-year lows earlier in the week.
Brent crude breached the US$50 dollar a barrel mark in a short-covering relief rally late on Friday, as traders covered their positions after the market stabilised in the middle of the week.
Still, don’t expect next week to be plain sailing. Thursday and Friday’s Brent gains may well prove unsustainable.
And comments by senior officials at the US Federal Reserve over the weekend suggest that an interest rate rise next month – that New York Fed president William Dudley described as “less compelling” – is once again a possibility, given the strong state of the US economy.
“Really we don’t know what to expect,” said the Emirati retail investor.
“Anyone can talk, but at the end of the day no one knows what will happen on the market this week.”
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