Middle East funds are more positive on UAE equities

Poll suggests heavy fund flows from UAE to Saudi Arabia will ease

Middle East fund managers have turned very positive on equities in the UAE and are now more bullish on that market than Saudi Arabia for the first time in eight months, a monthly Reuters poll showed yesterday.

UAE bourses have fared poorly this year, especially Dubai, where the stock index has tumbled 13.7 per cent. They have been hurt by slumping real estate prices and an outflow of funds to Saudi Arabia, where investors are eagerly anticipating Riyadh’s entry into emerging market indexes next year. Reuters’ latest poll of 13 leading regional fund managers, conducted over the past week, suggests that trend may soon change, however.

Fifty four per cent of managers now expect to raise their allocations to UAE equities in the next three months.

In the previous poll, 31 per cent expected to raise UAE allocations and the same ratio intended to reduce them.

Managers cited two major reasons for the shift. One is valuations: Dubai’s poor performance has left stocks there trading at less than eight times trailing earnings, compared to about 14 times for MSCI’s emerging market index.

“The underperformance of the UAE market and the undifferentiated sell-off across all stocks, irrespective of longterm fundamentals, has resulted in attractive valuations for some well-managed companies,” said Sachin Mohindra at Abu Dhabi’s Invest AD.