QE outperforms again on MSCI hopes

May 28, 2014 - 12:35:40 am

DUBAI: Stock markets in the Qatar and United Arab Emirates outperformed the region once again yesterday because of the approach of MSCI’s upgrade of those markets, even though many institutions believe many shares are now richly valued.

Qatar Exchange added 106.22 points, or 0.79 percent, to advance to 13,499.56 points from 13,393.34 on Monday.

Among the top gainers were Qatar Insurance, which was up 2.38 percent to QR77.30, Vodafone Qatar gained 2.94 percent to QR19.25, Electricity and Water added 1.89 percent to QR194 and Masraf Al Rayan up by 3.24 percent to QR60.50.

The Qatari index also rose after the Emir, H H Sheikh Tamim bin Hamad Al Thani, ordered listed companies to raise their foreign ownership limits to 49 percent.

At present, foreign ownership is usually limited to 25 percent, though some firms have already been raising their ceilings above that level. 

Once implemented, the order could have a major impact in attracting foreign money to Qatar, and in the long run even help to secure developed market status for the bourse. Although MSCI is about to upgrade Qatar, it is limiting the weightings of four major firms in its index because of low fo

Dubai’s main index climbed 1.1 percent to 5,009 points, just below technical resistance at 5,011 points, the neckline of the minor head & shoulders pattern triggered earlier this month.

Abu Dhabi gained 1 percent to 5,099 points; it faces strong resistance on last month’s multi-year peak of 5,249 points.

Local retail investors are counting on fresh inflows of passive funds around the end of this week, when international index compiler MSCI will upgrade the UAE and Qatar to emerging market from frontier market status.

These flows are likely to be relatively minor — a few hundred million dollars — and may not be enough to offset profit-taking in the markets after their strong rises earlier this year. For that reason, many institutional investors have become cautious.

“The DFM index is trading at a valuation level of 19.4x, much higher than the Qatari and Saudi Arabian indices which are trading at PE multiples close to 14.5x, discouraging international investors tracking the MSCI emerging index,” Jeddah-based Alkhabeer Capital said in a report.

Nevertheless, a significant number of retail investors remain willing to put fresh money into the markets. In Dubai, they once more focused on stocks that will be included in the new MSCI emerging index, including Emaar Properties, which rose 1.5 percent, and builder Arabtec , which shot up 9.2 percent. “The recent volatility witnessed in Gulf equities should continue in the ensuing weeks given that we are now entering high seasonality effects due to the summer, and retailers tend to cash in profits,” said John Sfakianakis, chief investment strategist at Saudi Arabian investment firm MASIC.