Bullish Dubai stock market roars ahead

Dubai stocks entered a bull market as the lowest valuations in four years lured investors following a selloff across the Gulf region. The DFM General Index rose 2.5 per cent to 3,170.27 on Monday, bringing its gain since a Jan. 21 low above the 20 per cent threshold for a bull market.

Dubai Islamic Bank PJSC, the biggest Shariah-compliant lender in the United Arab Emirates, led the advance with a 3.7 per cent increase. Companies on the gauge traded at an average of 8.7 times their estimated earnings over the next 12 months, compared with 10.9 for the MSCI Emerging Markets Index, according to data compiled by Bloomberg. They traded at 7.2 times expected earnings on Jan. 21, the lowest in four years.

Stocks are recovering from the worst start to a year since 2011 as oil, the biggest source of government income in the six- nation Gulf Cooperation Council, climbs from the lowest level in more than 12 years. While Dubai's economy doesn't depend on crude revenue to fund expenditure, it relies on its oil- producing neighbors to spend on tourism, trade and commerce. The GCC, which includes Saudi Arabia, is home to about 30 per cent of the world's proven crude reserves.

“The price-to-earnings multiples are depressed, the dividend yields are high compared to regional and international markets and the currency is pegged too, so it offers investors protection,” said Nabil Farhat, an Abu Dhabi-based partner at Al Fajr Securities. “If oil prices stay at higher levels, then it will last.” Brent crude, a benchmark grade for half the world’s oil, rose 2.7 per cent to $33.90 per barrel at 2:16 p.m. in Dubai.

Bloomberg