|01-01-2015, 10:57 PM||#1|
UAE stock markets survive 2014 rollercoaster with a gain
Bourses in the United Arab Emirates have witnessed a sharply volatile year, but managed to eke out a notable gain at the end.
The Dubai Financial Market (DFM) ended the year up 13%, and have seen extremely wide swings throughout the year, tough most of the big events were positive, the oil-driven sell-off was severe.
Abu Dhabi`s main index managed to rise 5.6% for the whole year, after having gained 24% earlier.
From a world-leading gain of nearly 60% to multiple 20%+ losses, the Dubai Financial Market`s (DFM) high liquidity was a major catalyst in a highly volatile year.
Stocks in the UAE as well as Qatar received massive support in June after global index compiler MSCI Inc. upgraded both countries to emerging markets, which stoked speculation for potentially large inflows of money into their stock markets.
Markets in the United Arab Emirates also received a boost then after MSCI increased the weighting of three stocks in the UAE to its emerging market index.
In June, the sudden resignation of then-chief executive Hasan Ismaik sent the stock price of Arabtec Holding sharply lower, as it lost as much as 60% of its value, dragging the whole stock market down by nearly 25% before recovering most of its losses.
Rumors that Arabtec had plans to delist, or that Aabar was planning to divest its stake in Arabtec kick-off the slide, and investors were not convinced even with many desperate series of statements on the DFM that those rumors were untrue.
Companies in the UAE started weighing IPOs after Dubai’s main index gained as much as 59% this year. The 55% share sale of retailer startup Marka was the first company to list its shares on the DFM since 2009 and was 36 times oversubscribed.
This surge in the stock market has lured more companies to go public in 2014, and is prompting plans for next year.
IPOs in the UAE garnered $3.74 billion from share sales in 2014, up from $774 million in 2013, of which $1.58 billion raised by the Emaar Malls Group in September.
The Emaar Malls Group (EMG) shares soared nearly 20% on the first day of trading for the much-anticipated debut on Dubai`s stock market at the start of October.
Fashion retailer Marka successfully listed on Dubai’s Financial Market in September to start a series of IPOs that have boosted investor sentiment and prompted more companies to go public.
The most recent of these IPOS, the Dubai Parks & Resorts and Amanat Holdings came at a time of major volatility in the market. Dubai Parks and Amanat fell 9% and 12% respectively just on the first day of trading.
Stocks in the UAE however, alongside most markets in the region, slumped in a panic-selling wave during the last few months of 2014 on the back of the slide in oil prices.
In the fourth quarter alone, Dubai lost 23% and Abu Dhabi fell 11.2%.
Brent and U.S. oil prices lost more than 50% of their values in the last six months, which spurred bets that large oil exporters such as Saudi Arabia and the UAE will start cutting their spending on economic development.
The panic seen in the final quarter of this year suggested that performance is under the mercy of retail investors who dominated trading in the UAE and across the region for most of the decline.
Gulf equity markets are estimated to have lost $150 billion in value since the start of November, as the oil-spurred selling continues, with no signs of investors calling a bottom for the selloff.
Over the last couple of sessions before the end of year, Gulf markets have been buoyed higher by Saudi Arabia’s 2015 fiscal budget, which plans to keep high levels of spending despite lower revenues from oil, which saw stocks recover some of early December’s sharp selloff.
Also, investors have stopped or eased aggressive adjustments of positions regarding oil fluctuations, and trading volumes have declined. The stabilization in the stock market could also be due to many investors leaving markets, and it is possible that volatility could return after year-end. Brent crude oil prices fell 2.35% on Wednesday.
In the coming period, institutional investors and fund managers are however planning to increase their equity allocations into the Middle East, and are expected to focus on markets where petrochemicals are not heavily weighted, for instance, the UAE.
In the UAE, economic fundamentals and corporate profit growth are strong, and oil’s share of the economy was below 30%.
Moreover, ratings agency Moody’s recently raised the outlook for the UAE’s banking system to stable from negative, citing the continued improvements in the operating environment, as well as the sustained recovery of its real estate market.
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