Hassan Ali Choucri

'Bearish sentiment is just about universal at the moment, and that is what you would expect at a market bottom,' says Hassan Ali Choucri, General Manager of the Al-Futtaim HC Securities Company.

This is a joint venture between the Al-Futtaim Group and HC Securities & Investment, ranked among the top financial services firms in Egypt and 30 per cent owned by US giant Morgan Stanley.

'When I joined in January 2006 it was already apparent that the UAE was in a bubble situation and it took us until October to get our license from the Emirates Securities and Commodities Authority. But we see a silver lining in the crash in that the quality of the participants in the market is now higher, both in terms of the brokerage firms and the clients.

'In 2006 the retail clients were driven out of the market and the selling pressure has gone. What we expect for 2007 is a comfortable trading range from minus to plus 10 per cent, and then a 25% rally by the end of the year, so it is a good time to enter the market.'

But why have such confidence about the outlook? What is there about the UAE stock market that will enable it to make such an early recovery? After all, the recovery from the last crash in 1999 took four years.

'Well we are assuming that the stand-off remains in Iran and that oil prices range between $50 and $70 per barrel,' explains Mr. Choucri. 'But this is the UAE, the second largest economy in the region and growth prospects are very good.'

However Mr. Choucri concedes that the nose-diving performance of the neighboring Saudi bourse affects the outlook for the UAE market which shares many investors.

'Saudi stocks were much more overvalued than in the UAE, he says. 'But I think the correlation between the two will break down now as the UAE is attracting the more sophisticated international institutional investor while Saudi still keeps them out.

'We are seeing a lot more interest in the UAE market from these investors. The Dubai International Financial Centre is bringing many more of them into the country, and we see this as a good reason to take a position in the market now. This is not going to be a long market slump like after the 1999 crash, we see a recovery starting this year.

Mr. Choucri reckons a possible major correction in global stocks and a modest correction for Dubai real estate would also encourage investors back into the UAE stock market because of the lack of alternative investment opportunities.

'Higher oil prices mean that there is much more liquidity in the market than in 1999 when oil prices were under $10. This liquidity has to go somewhere and locally that will mean a quick recovery for the stock market.'

All the same, AFHC is not forecasting a fast return to the boom years of 2004 and 2005 but rather a more orderly upward movement, although still delivering a very healthy return to investors. A UAE market price-to-earnings ratio of around 12 and the high dividends just announced by the banks are also factors to note, according to AFHC.