Dubai shares soared the most in the world on Tuesday as a sense of relief prevailed among investors after the US President suggested that the planned military strike could be averted  if the Syrian regime followed through on a Russian proposal of putting its chemical weapons under international control.
The possible breakthrough to crisis , brewing since August 27, came almost at the same time as President Barack Obama in an interview to a US television network on Monday night acknowledged that it would be difficult to muster US Congress’s support for the resolution on military action. The latest development eased oil prices.
The DFM General Index jumped 8.50 per cent, the most in about four years, to close at 2522.15. The Abu Dhabi Securities General Index advanced 5.53 per cent to 3671.59.
“The positive news about Syria and its implications for the region was the key driver for the markets today,” said Amer Khan, director at Shuaa Asset Management. “Obviously a risk-on environment across the GCC today, notably in the UAE, which had suffered during the recent volatility.”
Elsewhere in the Gulf, Qatar’s benchmark index gained the most, climbing 4.86 per cent, followed by Saudi Arabia’s measure which closed 2.90 per cent higher. Oman and Kuwait indices were up 2.57 per cent and 2.94 per cent respectively.
“Although the buying was primarily retail driven, the scale of it does indicate that investors believed the recent selling was overdone,” said Khan.
The Syrian crisis had roiled the markets,  with Dubai witnessing a decline of 7.9 per cent this month until yesterday’s surge. The DFM was the second best performing equity market in the world this year until late August when the US announced its intention to punish the Syrian regime of Bashar Al Asaad for allegedly using chemical weapons on its own citizens. The rally in Dubai this year has been driven by strong fundamentals, both macroeconomic and strong company earnings.
In Dubai, Emaar Properties was up 8.49 per cent, DFM and Dubai Investments, the two biggest gainers, advanced 14.47 per cent and Arabtec closed 11.27 per cent higher.
“The rebound today was a very good strong signal to confirm that the correction we saw in the past two weeks was a sentiment driven issue rather than by the fundamentals of the market,” said Mohammad Ali Yasin, head of brokerage at National Bank of Abu Dhabi.
Volatility is expected to continue almost until the next earnings quarter in mid-October, according to Yasin.
“What we lost since August 27 is close to 17 per cent before today — it will take some time for us to regain that. The volatility will continue for a few weeks. For every rise there will be profit taking sessions,” said Yasin. “Until probably we are closer to the announcement season of the third quarter there will be volatility and it is then hopefully the results will indicate how the investor sentiment moves into stocks based on the performance and expected results at year end.”
Earlier in the morning Asian stocks saw gains, including Tokyo’s Nikkei, which rose 1.1 per cent. India’s BSE Sensex surged 727 points or 3.77 per cent to close at almost 20,000, as rupee saw a strong recovery to below 64 a dollar. Positive Chinese data on industrial output and retail sales, both seeing the fastest growth this year, added to the economic sentiment that a deeper slowdown in the world’s second biggest economy may have been avoided. MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.8 per cent, extending Monday’s 1.3 per cent gain to reach highs not seen since early June.
Benchmark Brent oil prices fell 0.7 per cent to $112.88 (Dh414.61) a barrel, extending Monday’s 2.1 per cent slide. US crude slipped 0.8 per cent to $108.60. Lower oil prices are usually a positive development for Asia, a region that relies heavily on imports for its energy needs. Safe-haven US and German government bonds and gold and other precious metals were also back-pedalling.
The waning of tension in Syria and positive economic data also saw Europe making early gains of 0.6 to 1 per cent on London’s FTSE, Germany’s Dax and Paris’s CAC 40. In early trading Wall Street was up setting it on course for a sixth consecutive day gain.