UAE bourse enters bull charge

The GCC's third largest stock market, the UAE, now seems to have entered a bull run, with its benchmark Emnex index up by 3.8% last week to 1,837.79.

Volumes on the UAE bourse hit $57.7m, more than four times the volume seen in the previous week, and more in line with the other two major Gulf stock markets. Saudi Arabia saw shares worth $538.7m change hands last week, while Kuwait weighed in with share transactions valued at $268m.

Traders say that business volumes could be higher, if only they could get more shares to sell. For the UAE bourse remains highly illiquid with a vast number of shares never seeing the light of day. They remain tucked away in national portfolios, and the owners merely collect the dividend payments.

Non-UAE nationals who wish to buy shares have two options. To buy one of the mutual funds managed by Emirates Financial Services, the National Bank of Abu Dhabi and others. Or to buy shares in the Dubai government's Emaar Properties real estate development company.

But again, anyone who wants to put a lot of money into the market will find that these avenues are rather restricted. On the other hand, a shortage of supply is generally a good thing for prices, and demand for UAE stocks seems to be rising at the moment.

The forces at work in the UAE market are a compound of low interest rates which make equity dividends attractive, a surge in government led investment on major products and a return of investor confidence, backed up by a feeling that international equities are no longer attractive.

With a rise of some 14% now in the bag for 2001, investors in the UAE bourse must be wondering about what 2002 will have in store. And given under performance in the past three years, and the benign outlook for oil prices, the omens must be good.

Could the UAE market match this year's South Korean stock market rise of 37% in 2002? It is not at all impossible, barring further global disasters.