UAE stocks continued to drop on Sunday after falling most of last week amid concerns that valuations have raced ahead of prospects for profit growth. This follows a rally fuelled by a rebound in oil prices.
Emaar Properties, the country’s biggest publicly traded real estate developer, led declines in Dubai. FGB, the country’s largest bank by market value, headed the drop in Abu Dhabi.
The Dubai Financial Market General Index slipped 1.2 per cent, while Abu Dhabi’s benchmark fell 0.8 per cent. Before on Sunday’s drop, the indexes had gained 4.5 and 1.9 per cent in March as crude oil prices staged a rebound from multi-year lows.
“The fact is even though oil has rallied, it has not rallied to the point where it has become comfortable, so the first quarter will be a challenging one for most companies,” said Sachin Mohindra, a portfolio manager at Invest AD, an Abu Dhabi-based asset manager.
“It will be relatively subdued and there might be negative surprises, therefore I am cautious at these levels given that the market has already rallied. Since the lows in January, the market has rallied quite a lot.”
Mr Mohindra noted that despite his concerns over valuations, UAE stocks were still more attractive than equities in neighbouring Arabian Gulf countries. That is because the UAE is more economically diverse and has not been hit as badly as countries such as Saudi Arabia by the drop in oil prices.
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