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Will UAE stock investors push DFM and ADX into instant turnaround after Sunday’s selling over Omicron?

November 29, 2021

Investors worldwide are hitting a pause on panic selling after Omicron worries

Dubai: UAE stocks could be in for some sharp revival if investors are convinced by what they are seeing on Asian markets as well as oil prices. Brent crude, which is the marker Gulf oil producers use, is trending positive, going up by 5 per cent to $75 plus a barrel as investors take a pause worrying about what the latest COVID-19 variant – the Omicron – could do.

UAE investors can have reasons to cheer from trends they are seeing elsewhere – both US and European stock futures are gaining early Monday. These taken together should be enough to put some firepower into trading activity on DFM and ADX as well as other Gulf stock markets.

UAE stocks endured a tiring day on Sunday, with DFM dropping more than 5 per cent and the Abu Dhabi Securities Exchange by 1.82 per cent, with investors turning extra cautious about the new Covid variant. Both markets saw heavy trading, with DFM recording a value of Dh735.83 million from 521.88 million in stocks traded.

Look to oil

Real estate stocks came under pressure, and there were two that dropped to 10 per cent, the maximum possible under the ‘circuit-breaker’ rules. (These kick in when a stock’s value goes up by 15 per cent or down by 10 per cent. The stock’s trade is then stopped for a while.)

“Futures only provide an indication of what’s on investors’ mind – and quite a few seem to be thinking there’s an excessive worry about Omnicron,” said a Dubai-based analyst. “It happened when the first reports emerged about the Delta variant just before summer.

“The oil price turnaround today could be what UAE and Gulf stock investors could take their cues from – and that’s running positive.”

In for longer term

If DFM and ADX do engage in a quick turnaround, it could also be that investors are intent on picking up some stocks after they lost some of their sheen. DFM is up 19 per cent plus this year, while ADX, boosted by a series of IPOs, has gained 60 per cent.

“Long-term investors are clearly seeing the presence of value discovery in Dubai and the UAE,” said another analyst. “Especially on the back of capital market reforms and the slew of IPOs that are due to broaden the depth and scope of the marketplace in the coming months.”

Dubai plans to have IPOs of up to 10 public sector enterprises in the near-term, starting with DEWA and the toll-gate operator Salik.


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