Stock markets in the UAE rallied yesterday as investors snapped up shares ahead of the country's upgrade to the MSCI Emerging Market index on Sunday.
The Dubai Financial Market jumped 5 per cent, while the Abu Dhabi Securities Exchange added 5.5 per cent.
The nine stocks chosen to be included in the index – Abu Dhabi Commercial Bank, Aldar Properties, Arabtec, DP World, Dubai Financial Market, Dubai Islamic Bank, Emaar Properties, FGB and National Bank of Abu Dhabi – led the eleventh hour bout of frenzied buying.
“It looks like last-minute positioning by managers ahead of the reclassification,” said Edward Evans, a London-based portfolio manager at Schroders, which manages more than $28 billion in emerging market equities. “Volatile flows can probably be expected in these markets over the coming few weeks.”
The DFM General Index’s gain brought its year-to-date advance to 51 per cent, helping it maintain its wide lead as the best performing index among 90 global indexes tracked by Bloomberg. The ADX General Index’s advance takes its gain since the beginning of the year to 22 per cent, making it the fourth best performer. Qatar’s index, which also joins the MSCI emerging market index next week, has added 32 per cent this year, handing it the No 2 spot.
The advances yesterday in the UAE were led by NBAD, the UAE’s biggest publicly traded lender, and ADCB – both leapt 15 per cent, the maximum a share can rise in one day, to Dh17.25 and Dh9.38 respectively. In Dubai, Emaar, the country’s biggest listed traded property developer, rose Dh7.2 per cent to Dh10.45 while DFM, the emirate’s bourse, advanced 15 per cent to Dh4.25.
Since the announcement last June that the UAE would join the emerging markets index, which has more than 800 listed companies in 21 markets across the developing world, UAE stocks have rallied in anticipation.
Dubai’s index alone more than doubled last year, propelled not just by the index upgrade but also by improving economic indicators. The UAE’s economic growth exceeded 4 per cent in 2013 amid government spending on infrastructure and a rebound in trade and tourism. Shrinking interest rates have also helped businesses to expand and individuals to seek leverage for property and big ticket items.
The rich valuations may make some fund managers cautious about being overexposed to UAE assets. Still, about $1bn will flow into UAE stock markets from foreign index trackers alone as a result of the upgrade to emerging market, according to HSBC.
By contrast to UAE stocks, emerging markets as a whole have not fared as well over the past year-and -a-half. The MSCI index, which bundles stocks from developing nations including Brazil, Egypt, Turkey, India, Russia, China and Indonesia, has gained just 3.5 per cent so far this year.
Last year it dropped 5 per cent amid political and economic turmoil in many of its countries, leaving many bargains in its wake. That may make active fund managers – those who do not have to follow benchmarks – more eager to look for cheaper stocks than those in the UAE.
mkassem@thenational.ae
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