UAE bourses deal with own issues unlike global peers
(12/23/2018 7:57:00 AM)
Global markets may be getting adversely impacted by a hawkish Fed or trade wars or fears of slowing growth, but local bourses are grappling with their own issues.
The sticky issues have been falling oil prices, sluggish demand and oversupply in real estate sector and the possible impact on the banking sector. These factors have been prompting old traders to run for cover and new ones are turning indifferent.
“Traders are exhausted by the continuous retreat of the index. They use margin lending so it actually burns a lot of investments. They have lost faith in DFM or ADX as a source of good returns,” Mohammed Ali Yasin, Chief Strategy Officer at Al Dhabi Capital Ltd (ADCL) told Gulf News.
This has led to underperformance in the Dubai Financial Market general index, which has shed a fourth of its value so far in the year compared to a flat but yet volatile performance in the Dow Jones Industrial Average. The only saving grace has been the Abu Dhabi Securities Exchange index, which is up 10 per cent since January,
So far, local markets have not been impacted by the global meltdown, but analysts say additional pressures from global markets would just compound already existing problems.
The institutions gave been out of the market for some time. The fall in US stocks may result in margin pressures for them, Overall that will not help us,” Yasin said.
And there is no light at the end of the tunnel.
“The supply glut in real estate is not over and demand is not rising, so real estate companies are not looking strong. Banks also may not be as buoyant as expected to be, Overall there is no catalyst at the moment to change the mood or direction. Many people don’t know what the catalyst is,” Yasin said.
Yasin advises to encash local holdings and start 2019 on a clean slate.