UAE Markets Vulnerable After Dive By Dubai

United Arab Emirates stock markets look vulnerable on Tuesday after Dubai’s 2.8 per cent tumble on Monday suggested a period of profit-taking could be starting.

Most fund managers still think the long-term outlook for the markets is very positive, but given their sharp gains so far this year – Dubai is up 79 per cent – there is ample room for profit-taking.

Dubai’s bid to host the 2020 World Expo, which will be decided late this month, has been helping to push up stocks, but Monday’s slide suggests investors are starting to feel that any benefits from staging the world’s fair are mostly priced in.

The Dubai index, which closed Monday at 2,823 points, has its next underlying support on the August peak of 2,762 points; stronger support lies around the 100-day average, now at 2,598 points.

Abu Dhabi is likely to be less volatile than Dubai – it dropped only 0.9 per cent on Monday – as it is viewed as less richly-valued and a less speculative market.

Dubai Islamic Bank, the largest sharia-compliant lender in the emirate, said late on Monday that its third-quarter net profit jumped 52 per cent to Dhs461.4 million ($125.6 million), comfortably beating the average analyst forecast of Dhs416 million.

Dubai developer Union Properties reported a jump in its third-quarter net profit, making Dhs171.9 million compared with Dhs49.6 million a year earlier. The profit hike was driven by a drop in its costs as well as the recovery of Dubai’s real estate market – but investors were already betting on a spectacular recovery by Union Properties, so the earnings will not necessarily push the stock up.

Budget carrier Air Arabia, the UAE’s only publicly listed airline, reported a 9 percent drop in third-quarter net profit to Dhs206 million, missing an average forecast of Dhs241.3 million.

In Kuwait, No.1 telecommunications operator Zain reported a fifth straight decline in quarterly profit after the market closed, largely because of foreign exchange moves – its profit was slightly below analysts’ forecasts.

In Egypt, Finance Minister Ahmed Galal said a second economic stimulus package, previously estimated at 24 billion Egyptian pounds ($3.5 billion), would be launched earlier than expected – the target is now “before January”. The government had previously indicated it might only be brought in early next year.

The news may not boost the stock market, however, as the government had already talked extensively about its hopes for stimulus measures and the market has in the past two days shown signs of profit-taking pressure after its strong rally since late June.

The global market environment is mixed, with most Asian shares and the oil price marginally lower but Tokyo higher after Wall Street edged up overnight.