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Tue, 06 Jan 2009 | 07:29 GMT

UAE firms set to appreciate

Emirates Business 24/7
 
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27 November 2008
The share prices of UAE companies that have government shareholding are expected to recover faster and appreciate more in the next three to four years, a senior Nasdaq DubaiNasdaq DubaiLoading... executive said yesterday.

"I think it is the right time for leading investors, institutional and individual, to buy [such companies] at the current price levels, which are in some cases lower than book value," said Chief Executive Jeff Singer on the sidelines of the DIFC Week.

"A lot of shares have reached all-time low levels and this is very attractive for long-term investors seeking to build their portfolios," he said.

Singer described financial markets in the region as "healthy bear markets" where there is enough liquidity and investors who are trading despite the global downturn.

"The sentiment is down but there are buyers in the markets and investors with long positions are selling while new investors are coming and buying these shares. This is healthy for the financial markets because it indicates that there is trust in the markets," said the CEO.

"On Nasdaq DubaiNasdaq DubaiLoading..., DP WorldDP WorldLoading... traded 300 million shares during October. The shares of DP WorldDP WorldLoading..., DepaDepaLoading... and DamasDamasLoading... are being traded quite actively compared to other bear markets. Also, we see strong volumes on Dubai Financial Market such as in Emaar Properties," he said.

Other financial market experts and officials voiced concern over what they called the "wait and see" strategy of major investors during the current period.

There was wide agreement that UAE markets have huge liquidity waiting in the wings while institutional and leading individual investors hold back until they see bottom.

This situation will continue until the second quarter of 2009, and the markets may change their trend during the second half of next year, they said.

Alasdair Warren, Managing Director of Goldman Sachs International, predicted that the financial markets would remain challenged during the next few months due to two major factors.

"The lack of liquidity is still there because banks are not funding the markets. We expect some banks to start transactions by the second half of the next year. The second challenge is the mismatch between price expectations and valuations.

"This mismatch will continue until the second half of next year. We expect limited transactions during the first half of 2009, said the managing director.

"Despite central banks' support for the banking system, the liquidity as of now is not entering the markets. We need inter-bank liquidity and funding in place to see strong performance in financial markets," Warren said.

Mostafa Abdel-Wadood, Managing Director of Abraaj Capital, agreed that investors were becoming more cautious about transactions in financial markets. "However, the most important thing is the opportunities. There is an increasing number of investment opportunities and this will lead to some strong transactions during the first half of 2009," Abdel-Wadood said.

He stressed that GCC markets were resilient due to the high local liquidity and the increasing global interest in the region.

SCASCALoading... law
The Securities and Commodities Authority (SCA)Securities and Commodities Authority (SCA)Loading... yesterday said it is not opposed to the postponement to next year of the enforcement of the margin trading system in UAE financial markets.

The system was to come into effect next month. SCASCALoading... said in a statement the decision comes in response to requests by several brokerage firms for extra time to ensure technical readiness.

Ziyad Al Dabbas, Financial Advisor to the National Bank of Abu Dhabi, told Emirates Business SCASCALoading...'s decision is a temporary measure. Brokerage firms asked the regulator to issue the margin trading law but delay enforcement until markets improve, he said. "Enforcing the system at this time would not be useful since the majority of banks do not give loans against shares."

Economic advisor to Al Fajer Securities Dr Humam Al Shamma said postponement is important because brokerages have suffered losses for providing such facilities. "These companies can not offer credit within the margin trading system."

By Mohamad Al Kady

© Emirates Business 24/7 2008

 
 
 
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