Foreign investors adopt long-term view on UAE stocks

The forecast by analysts comes amid expectations the exchanges will catch up with the recovery in emerging markets and the UAE’s positive macro economic outlook.

Foreign investors have increased their stakes in most active stocks on DFM and ADX during the past three months in the expectation the markets will remain bullish until the end of the year.

A rally during September was driven by a flow of new liquidity from foreign and institutional investors, which analysts described as “money that’s come to stay in the market for a longer period”.

The pattern of foreign ownership of listed companies has seen major changes during the past three months, especially in active stocks.

Investors were targeting two main groups of active companies – traditional stocks in the real estate sector such as Emaar, Arabtec, Aldar and Sorouh and a new group of active stocks that are expected to show good results by the end of the year, such as DSI, Air Arabia and Dana.

Foreign and institutional investors remained active on DFM, accounting for around 40 per cent of the total turnover. Net foreign investment in the market during July reached an aggregate buy of Dh108.39 million, while institutional investors were net sellers of shares worth Dh30.07m.

Foreign investors were net buyers of shares worth Dh339.7m in August and institutional investors became strong buyers of shares worth Dh529.5m during the month.

And foreign investors were net buyers of shares worth Dh602m last month while institutional investors continued to increase their accumulations in the market with a net buy of Dh739.8m.

Foreign investors continued to expand their holdings in the market last week as they were net buyers of stocks worth nearly Dh232.5m, while institutional investors were net buyers of stocks worth Dh305.6m.

The clear accumulation in the markets came as the DFM index moved up with strong gaps last month. Last week it broke through its critical resistance of 2,200 points and it has added 4.84 per cent so far this month.

The ADX index added 7.84 per cent last month and has continued its rally so far this month by adding 2.21 per cent.

“This is not hot money anymore,” said Hesham Bakry, Institutional Sales Manager at Al Futtaim HC. “This liquidity is coming into the UAE markets for a longer period. There are clear signs that foreign and institutional investors are locking in part of their investment in the markets for a longer period.”

“Foreign investors injected more liquidity during the past three weeks as the DFM and ADX indexes made considerable gains. This is due to macro-economic factors in the UAE and the whole Gulf Co-operation Council states.”

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