UAE stocks shed their recent gains

The upward shift in UAE stock prices since the war in Iraq started changed direction last week, wiping out most of the recent gains, with the Emnex closing 20 points lower at 2,369.93 points.

This movement appears to mirror the change in sentiment observed in major Western markets, where a strong rally once the war in Iraq shifted in the allies favour has been replaced by a downward slide and a return to the examination of fundamentals. It could be that the old stock market maxim, 'Sell in May and go Away!' will apply this year.

However, the major Inward Investment Summit in Dubai over the next few days could rustle up some interest in local UAE stocks. For the economic problems that are only too obvious in Western markets do not really apply in the Middle East. Here the UAE is in an economic boom and not a slump.

Indeed, property and financial shares have been able to hold on to their recent gains. It has been the telecoms sector, or Etisalat, that has taken a pounding from local investors.

The Emnex is still trading on a price/earnings ratio of less than 15, and after the tremendous profits from state-owned Emirates Group last week and the banks Q1 results, this surely implies undervaluation. For the profits of many key UAE companies are rising strongly, and that is not reflected in this p/e ratio.

Hence it might be wise for investors to sell in May in Western markets and stash their cash away in the UAE bourse. The market has a lot further to move.