* Dubai trims year-to-date gains to 13 percent
* Arabtec tumble, Emaar dividend dampen sentiment
* Valuations stopped looking very attractive
* Double top points lower in short term
* Many expect rebound later this year
By Nadia Saleem
DUBAI, March 27 This year's best-performing Gulf
Arab stock market has stumbled in the last few weeks, and while
fund managers say a strong economic outlook means the long-term
direction is still up, it may be months before the rally
Dubai's main equities index jumped about 20 percent
in the first two months of this year to levels last seen at the
end of 2009. It was boosted by signs that the emirate was
recovering from the property market crash and corporate debt
crisis of 2009-2011.
Confidence returned to the real estate sector as residential
property prices began to rebound, and growth in banks'
outstanding bad loan provisions slowed.
But in late February the stock market's uptrend stalled and
this week it has fallen sharply - a reminder of the limits of
Dubai's regained confidence, and its vulnerability to any
interruption in the good news.
Ali Adou, portfolio manager at The National Investor in the
United Arab Emirates, said the economic picture had not darkened
but investors no longer felt Dubai stocks were particularly
"The valuations discount between the UAE and other emerging
markets is limited now - that's why a correction is needed for
this discount to widen again and attract investors," he said.
"There isn't a reason to be bearish as the macroeconomic
picture is still intact. A correction would provide an entry to
investors who are looking for exposure to the UAE markets."
The Dubai index dropped 1.6 percent on Wednesday to 1,837
points, trimming its year-to-date gains to 13.2 percent.
Technical analysis suggests the drop was a bad omen for
coming weeks because the index broke below support at the March
low of 1,860 points. That triggered a double top formed by the
February and March peaks; the height of the pattern points down
to around 1,770 points.
One reason for the recent slide is the passing of the dates
on which shareholders in some companies are entitled to annual
dividends, analysts say; interest in those stocks has suddenly
But there have been other reasons. The Dubai market has been
weighed down by a 30 percent plunge in the shares of major
construction firm Arabtec after it announced its
intention in late February to raise $1.8 billion of capital.
The announcement coincided with a management shake-up led by
Arabtec's top shareholder, Abu Dhabi state fund Aabar
Investments; in the long run, the changes could help Arabtec
expand around the Gulf. But for now at least, shareholders have
been focusing on the fact that the capital raising could dilute
Another blow was a dividend announcement by Emaar Properties
, Dubai's biggest real estate developer and therefore a
symbol of the emirate's economic recovery. Emaar's shares soared
as much as 52 percent between the end of December and a peak of
5.70 dirhams in mid-March.
But in late February it announced a 2012 dividend of 10 fils
per share - the same level as in the previous two years, but
lower than some investors had hoped. The stock's rally
subsequently petered out and it has lost 11 percent in the last
Most analysts do not expect such disappointments to have a
long-term impact on the market.
"Emaar at 5 dirhams is close to book value and if your
outlook is positive over the next year and a half, it's still a
good time to buy," said Amer Khan, fund manager at Dubai's Shuaa
The recent profit-taking should bring back bargain-hunters
in this and other stocks, he added. HSBC has an overweight
rating on Emaar with a target of 7.7 dirhams.
But for coming weeks, possibly months, the market may have
seen its best levels. "Technically, stocks are overbought and
the market will consolidate around these levels or a bit lower,"
Adou said budget airline Air Arabia and Aramex
, a package delivery and logistics company, were
proxies for growth in Dubai's tourism and services sectors and
were therefore defensive plays which would outperform during a
Khan said Dubai's pull-back would ultimately prove healthy
for the market. "On a medium-term view, fundamentals and
valuations have room to fill up. The UAE is recovering and the
blue chips will reflect that."