UAE stock rally running out of steam

With strong gains over the past three weeks the UAE's stock market has seen sharp declines on two of the past seven days which may indicate that this rally is running out of steam.

However, the Emnex Index was still up by 50 points last week to 2,511.81 and is up by almost 100 points over the past two weeks. That is all the more impressive because this is traditionally a quiet time for UAE stocks with many important players on vacation.

Best performance has been in the financial sub-sector which has advanced by 137 points over the past fortnight to reach 2,914.11. Analysts told Gulf News that a softening of some blue-chip financials is now possible over the summer months.

Meanwhile, property sector shares have posted more modest gains. Progress here depends on how investors perceive the Dubai real estate outlook with some now beginning to focus on possible over supply in certain segments.

All the same, UAE stocks have not advanced anything like as strongly as the other key GCC bourses in the first half of the year, and it may well be that in the second half an element of catch up is seen.

Certainly price/earnings ratios are attractive and the profits outlook excellent for most UAE companies. There is also no let up on the huge investment flows seen in the local real estate market, particularly in Dubai, and the upcoming free zones hold a great deal of promise.