Saudi, Egypt Stocks Turn Mideast Stars as Dubai Gets Ignored

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(Bloomberg) -- The rise of Saudi Arabia and Egypt as the top Middle East choices for equity investors is taking a toll on Dubai.

Trading on the Dubai Financial Market dwindled to 88 million dirhams ($24 million) on Monday, the lowest since September 2015 and about 57 percent below its 15-day average. The DFM General Index has slumped about 7 percent in 2018, while an index tracking emerging-market peers is little changed. The complaint among investors is that the banking and real estate companies that dominate Dubai’s bourse offer little in the way of triggers to trade their stock, with a few exceptions.

In contrast, Saudi Arabian stocks have climbed more than 12 percent this year, with foreign investors net buyers for 15 straight weeks, as local companies and the government benefit from rising prices for oil, the country’s biggest export. Expectations of billions in inflows to follow classification as an emerging market are adding to the buzz. Over in Egypt, the EGX 30 has gained more than 18 percent as investors applaud economic reforms and government plans to offer stakes in public-owned companies.

The two “are very interesting markets to look at now” compared with the United Arab Emirates, said Issam Kassabieh, senior financial analyst at Mena Corp. Financial Services in Dubai. “In the U.A.E., there are big projects, such as the EXPO 2020 in Dubai, but that is still seen as very far away. There is some caution in the U.A.E. market right now, even though dividends are quite attractive and many big caps are cheap,” he said.

Here are some recent developments in the markets to consider:

  • Dubai’s index is trading cheaper levels than the benchmarks in Egypt and Saudi Arabia, with its 12-month price-to-earnings ratio at 8 times, compared with 13 times and 14 times, respectively
  • FTSE Russell said last month it will classify Saudi Arabia as an emerging market starting next year. MSCI Inc. is due to announce a decision in June
  • Franklin Templeton estimates Saudi stocks could draw about $50 billion if Saudi Arabia earns emerging-market classification from MSCI; it also sees attractive valuations in U.A.E. shares
  • Dubai’s best performer in 2018 is Emirates NBD PJSC. The biggest lender in the emirate is up more than 26 percent as it increases the limit on foreign ownership to 20 percent from 5 percent
  • Dubai’s Worst performer is Marka PJSC. The retailer has slumped 26 percent in the past three days as it seeks shareholders’ approval to reduce capital. The stock has fallen 38 percent this year

©2018 Bloomberg L.P.

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