Fears that Dubai’s financial market has begun to overheat are among the findings of a survey released by Reuters today (Wednesday, April 30), which collected data from 15 fund managers in the Mena region over a period of ten days.
While the long-term outlook of the UAE stock market looks positive, respondents are wary about the short term. For the first time since September 2013, the ratio of managers that is bearish on UAE equities exceeds the ratio of bullish ones. Also, respondents believe that it is important to begin selecting individual stocks, as the overall market cannot be counted upon due to market volatility.
V. Gowribalan, head of asset management at Ahli Bank Oman, says: “The forecast is for the market volatility to increase, as markets have witnessed a continued rise over the past year (specifically in the UAE) and it is our view the ‘reflation trade’ is done. We see value in investing within the GCC equity space and identify Saudi Arabia, Qatar and Oman to be value propositions, with select pockets in the UAE. However, we prefer now to moderate our portfolio ‘beta’, as we see an end to the rising tide that lifted all.”
However, many investment managers are still bullish on the status of the region’s stock market. According to the report, 33 per cent is anticipating to increase regional equity allocations in the coming three months. Only 13 per cent intends to decrease them. In addition, 13 per cent intends to increase fixed-income distribution in the coming three months versus 33 per cent that expects to decrease. There is a notable change in sentiment since last month’s survey, with the results showing a ratio of seven per cent to 20 per cent.
John Sfakianakis, chief investment strategist at MASIC, says: “As long as corporate results remain healthy, liquidity is high and global markets don’t surprise on the downside, then Gulf markets should do quite well in the coming quarter.”