Will the UAE bourse boom post-war?

The UAE stock market looks poised for a major boom once the uncertainty hanging over Iraq is resolved.

Company profits are strong and rising, dividends are very attractive and shares sell on modest price-to-earnings ratios. But the biggest bull factor is surely the UAE itself.

This small Arabian country has really got its act together and is investing its oil wealth back into the domestic economy in a way that no other Gulf country can match.

Oil production should double by 2010, and the UAE's population will not be far behind. Meanwhile, Dubai will continue to blossom as a trading hub, business services centre and tourism magnet.

Yet the local stock market is still at sub-1998 levels and is dogged by poor liquidity. Traders complain that buyers just sit on their stocks and collect the generous dividends and that leaves market volumes low.

Three things need to happen. First, the market needs more initial public offerings to increase its capitalization and to encourage share ownership. Secondly, the Dubai Financial Market and Abu Dhabi Securities Market need to unite their trading platforms. And finally, more shares need to open up to foreign ownership.

But talk to senior market officials and the first two changes are agreed and just awaiting the resolution of the Iraq crisis. The third one is up to the companies themselves. In the meantime, there are plenty of undervalued shares going cheap and investors would be well advised to buy while stocks last.