|01-18-2015, 01:18 PM||#1|
Mubasher expects better times for Gulf stock markets
The latest turbulence in Arab Gulf equity markets which came on the back of plunging oil prices has created attractive valuations in the market, said Mubasher Financial Services.
“The abrupt and severe sell-off in oil markets has added to rising volatility in equity markets in our part of the world, but at the same time it has offered a silver lining,” said Amr Hussein Elalfy, the managing director and global head of research at Mubasher Financial Services.
Mubasher’s research division said the Dubai Financial Market (DFM) is trading currently at 11.8 times earnings, above its five-year average of 10.8 times earnings.
The division recently initiated a “buy” rating on Air Arabia, Etisalat, the Dubai Financial Market Company and Dana Gas.
Mubahser, which was the third-largest stock brokerage firm trading equities in the UAE in December, also said that the Abu Dhabi Securities Exchange General Index currently trades at 11 times earnings, compared with its 5-year average of 10.5 times earnings.
Qatar currently trades above its 5-year average and Saudi Arabia’s main index trades below the 5-year average.
Before the panic selloff that started late 2014, most stock markets in the region enjoyed superior growth that was supported by strong company performances and even stronger economic backdrops.
Company profits were justified and boosted by strong fundamentals, but when oil prices started plunging, investors started dropping equities on fears of slower growth and reduced spending from governments in the region due to lower revenue from oil.
However, the selloff made sure that valuations are now more reasonable and not distorted, which could give way for more entry points as indices have lost a great deal of value during the last two months.
Not to forget that lower oil prices should soon start helping global economic growth as they provide more space for consumer to intensify their spending.
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