The UAE markets are at attractive valuations with the Dubai index at 12.3X and the Abu Dhabi Index at 14.7X forward earnings
The outlook for the UAE stock markets is positive and Dubai’s largest bank Emirates NBD is bullish about the UAE and emerging market equities for the remainder of the year.
Emirates NBD said in its latest annual report that a number of factors now predicate upside for the UAE. “Regional relations have improved, oil prices are firmer, tourism is picking up with a planned vaccine and testing rollout. The business landscape has also been progressively liberalised in the UAE and in Dubai: foreign investors can own 100 per cent of onshore companies in most sectors, there are new visa options, and relations are normalising with Israel and Qatar,” it said in the report.
Anita Gupta, head of equity strategy at Emirates NBD Research, said the UAE is a definite preference within the GCC with banking, telecom and logistics stocks are looking good in the year ahead.
“What we are seeing is that oil is rallying positively. We are seeing low trading volumes but that should be mitigated by the increased weight in emerging market indices as more companies open up their foreign ownership limits,” Gupta said during an online media briefing on Sunday.
Emirates NBD said the UAE markets are at attractive valuations with the Dubai index at 12.3X and the Abu Dhabi Index at 14.7X forward earnings. “At a 0.9X Price/Book, Dubai is at a 50 per cent discount to broader emerging markets. We expect that a potential rerating of price to earnings multiples, currently at a deep discount to global peers, would provide considerable upside,” it added.
Banking, telecom, logistics attractive
“In the UAE, we like banks who maintained dividends and are among few sectors to be able to pay out higher dividends. We are also seeing yields which are attractive for net interest margins. Telecom sector has benefited from the work-from-home rule, increased data use and video streaming. Logistics sector to benefit from increased deliveries as e-commerce purchases go up,” added Anita Gupta.
On the real estate equity front, Emirates NBD is neutral as it awaits more clarity on the dividends issue. “We had a very strong January, both Dubai and Abu Dhabi indices going up. We see further upside going into the year-end,” she added.
Emirates NBD said the GCC region has lagged emerging markets performance in 2020 but the end of the year saw a pickup, in line with rising oil prices, which supports government revenue and stimulus. The UAE with its higher yields and lower valuations looks poised for a breakout.
For medium to long term, Emirates NBD prefers Asia and other emerging markets. “We see oil prices rise which are beneficial for the oil-importing Asia. Middle class is increasing consumerism, preferring new brands Consumers sectors that are to do with digital banks and e-commerce are among the top picks,” it said.