Investors in the UAE and GCC are not rushing to sell their holdings due to coronavirus and rather those investors who missed last year's rally are taking it as an opportunity to enter emerging markets, say analysts.
"So far, we have not seen any sellout requests from investors. The inquiries that we have seen is that when should we start adding to emerging market equities. And our answer is that if you have already invested, it is wait-and-see time. We'll not add until coronavirus outbreak dies down. Let us wait and see when the factories reopen in February in China and supply chain returns to normalcy. We have not received a single call from any investor who wants to sell out as yet," said Anita Gupta, head of equity strategy at Emirates NBD Group.
"In fact, on emerging markets, many people who missed out opportunity are asking when to enter. Investors are looking at it more as an opportunity than a scare," Gupta said during the release of global investment outlook report for 2020 on Sunday.
After a spectacular 2019, propelled by monetary easing meeting excessive pessimism, Maurice Gravier, chief investment officer, Emirates NBD Group, expects markets to come back to the reality of fundamentals.
He said that the global economic backdrop is resilient, with growth expected to be close to that of last year, while inflation remains subdued. "The effects of last year's rate cuts will be felt, supporting consumer spending, helping manage the enormous amounts of debt in the system, and providing oxygen to other central banks especially in emerging economies."
UAE equities: Best bet in GCC
Emirates NBD's Anita Gupta is the most bullish on the UAE equities among GCC markets.
"The UAE market is trading at lower valuations than the emerging and GCC markets both from price-to-book and price-to-earnings multiple. It also got very high dividend yield. In today's world turning defensive, that makes the UAE market attractive for investors.
However, the UAE market needs a catalyst because trading volumes are low and to take volumes up, what is going to work is the foreign ownership limit. Increased foreign ownership limit means emerging markets indices will add weight to the UAE equities which will results in more inflows both from passive and active investors. And that will increase trading volume as well," she told Khaleej Times in an interview on Sunday.
"Also, with oil prices being where they are now, are pretty positive for government spend that flows through to private sector. So that should also be the catalyst for the UAE markets, going forward," she added.
After the UAE, Gupta is quite bullish on the Saudi equities because of the stimulus measures Riyadh is taking.
"Saudi is increasing listings, starting with Saudi Aramco last year. Their corporate governance is also improving; plus, Saudi market is very well-diversified compared to other Gulf markets. They have companies listed from healthcare, insurance, retail, food companies, petrochemical and banking sectors. And the highest trading volume in the region with retail being a big part of their daily trading," she added.
MR Raghu, managing director of Marmore Mena Intelligence, says GCC equity markets are expected to be neutral with the exception of Dubai, Oman and Bahrain.
"The neutral outlook is supported by moderate improvement in economic conditions and corporate earnings. Wherein oil price is widely expected to be at around current levels. The outlook for Dubai is positive on the back of expected improvement in the corporate earnings. While the outlook for Bahrain and Oman seems negative, given the strains in the economy," Reghu added.
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