Dubai stocks enter bull market and could pull higher before a correction
Posted on 20 February 2012 with no comments from readers
Since the Dubai Financial Market touched a seven-year low on January 16th the market has been on a roll and yesterday clocked up a 20 per cent gain putting it officially into a bull market.
Volumes have surged to 250 million plus share a day. Good news for the 53 brokers left out of the 103 at the beginning of last year. Just a shame those buying are mainly local individuals and not foreign institutions.
2011 results OK
Financial results over the past few weeks brought a broadly positive message. The next issue of the ArabianMoney will examine how this translates into possible future stock picks (subscribe here).
However, the DFM is extremely late to the global stock market rally which started back in March 2009. That is an indication of a lot of ground to be made up though it also shows how fragile local confidence really remains.
Dubai is in recovery mode this year with its debts no longer posing any major hurdles and its highly profitable businesses back on track. Tourism, aviation and retail are performing well. Trade, real estate and financial services are lagging though also showing signs of life again.
But risks are not hard to isolate. Iran is only 50 miles offshore and the Strait of Hormuz is a vital trade artery that could be cut off in a nuclear showdown, possibly as soon as this summer. For now the rising price of oil is taken as a positive for the UAE.
Regional trading hub
Then again the latest figures from China, Japan and the European Union point to a slowdown in global trade this year, and that can hardly be good news for the trading hub of the Middle East. On the other hand, rising salaries for GCC nationals bode well for domestic demand.
But local financial markets tend to track global movements particularly to the downside. Markets near a four-year high in the face of a recession in the EU and Japan, and slowdown in China could be due for a correction.
As ever the floor of the DFM is a world unto itself with national investors suddenly rushing back to take part in the fun and make money. However, this does all seem a bit late in the day to cash in on the global stock market rally. A sharp snap-back could be on the cards or a pull higher before that happens.
