UAE stocks not discounting oil at $130 next year

UAE  stockmarkets are heading into the summer doldrums with a vengeance and are now almost back to the levels of last summer. Even the promise of oil at $130 as soon as next year from the top forecasters at Goldman Sachs could not raise prices yesterday.

That is a bit too far out for the average local investor whose buy-an-hold strategy seldom gets past lunchtime. Besides they are all having a bad run of luck.

Losing streak

ArabianMoney bumped into one national lady investor this week who opined that stocks were bad and that she had also lost money on real estate and most recently commodities. Unfortunately somebody always buys at the top.

Market watchers are also worried that the hopes that the UAE bourses might join the MSCI emerging markets index in June are fading because a key settlement system is running late. Meanwhile, the bad news from financial markets in the US, Europe and now even Asia is depressing local sentiment too.

There has also been concern about some comments from Emirates NBD chairman Ahmed Al Tayer that Dubai public spending will be squeezed 20-25 per cent this year to balance the books but it was not clear exactly which budgets will be affected.

Debt problems continue to emerge from the local woodwork. Gulf General Investment Company, a Dubai-based investment company has just defaulted on a $136 million loan. There have only been three IPOs this year, all very small and in Abu Dhabi.

Bear market

In short this seems a formula for lower UAE stock prices, possibly with a major bottom sometime deep in the summer months. Investors seem unwilling to look forward to what high oil prices might soon mean for a small, dynamic trading nation like the UAE with a massive hydrocarbons sector.

However, the mounting number of subscribers to the ArabianMoney newsletter, the only independently written investment newsletter produced in the UAE (click here), are getting the best available advice to capitalize on this upturn when it happens.

For the argument would surely be that an economy that benefits from $130 oil is more likely to be in the early wave of recovery than those countries having to pay this horrendous amount. ArabianMoney editor Peter Cooper gives his view of the outlook for UAE stocks in this video (click here).