KHALEEJ TIMES, Thursday, Nov 19, 2020 | Rabi Al Thani 4, 1442
UAE stocks get double-upgrade on broad recovery hopes
Emirates:
Stocks in the UAE have received a double-upgrade from Morgan Stanley on
the ground that they are highly exposed to a broad recovery.
The US multinational investment bank argues that the recovery of UAE bourse is
possible as the positive virus vaccine news remains “far from priced.”
Shares listed in Dubai and Abu Dhabi bourses, which are lagging emerging-market
peers this year, got a double-upgrade to tactical overweight as their exposure
to cyclical sectors including tourism, leisure and financials — a burden during
the pandemic so far — stands to benefit from upcoming vaccines, Morgan Stanley
strategists including Marina Zavolock and Regiane Yamanari wrote in a note.
The bullish outlook for the UAE stocks came as Dubai’s main share index added
about 0.3 per cent on Wednesday, with Dubai Islamic Bank and Dubai Investments
leading gains, putting on 0.9 per cent and 1.7 per cent respectively.
While the Abu Dhabi market posted losses on a day when most major Gulf markets
logged gains, Saudi shares reversed course to end sharply higher on Wednesday as
further positive news on Covid-19 vaccine development cheered investors.
The Abu Dhabi index logged losses for the first time in eight sessions,
finishing 0.2 per cent lower. Telecom major Etisalat was the top loser in the
blue-chip index, shedding 0.7 per cent, while major lender First Abu Dhabi Bank
ended the session 0.3 per cent down.
Saudi Arabia’s benchmark index added 0.6 per cent, with lenders National
Commercial Bank and Al Rajhi Bank gaining 2.0 per cent and 0.7 per cent
respectively.
Morgan Stanley had similarly double-upgraded UAE shares to overweight in
February 2019, citing an early recovery in the property sector and appealing
valuations.
“That view was reversed this year as the coronavirus pandemic triggered a slump
in oil price, the main source of revenue for economies in the Gulf, and hit the
country’s tourism and real estate industries,” the investment bank said.
“The UAE’s cyclical recovery has already begun,” Zavolock and Yamanari wrote,
noting stronger third-quarter spending as local residents consumed at home
rather than abroad during the hot summer.
The strategists also considered the UAE's handling of the pandemic to be among
the strongest in eastern Europe, the Middle East and Africa region, and believe
the winter tourism season will be better than expected.
Their decision to rate the country tactical overweight, rather than outright
overweight, stems from concerns over a real estate glut and banks’ low capital
ratios.
On Monday, Morgan Stanley upgraded Emaar Malls to overweight, expecting the
owner of Dubai’s biggest shopping centre to reap the benefits of an accelerating
recovery in tourism.
They also expect Europe, the Middle East and Africa region stocks to outperform
as earnings estimates for next year have flatlined at lows, “and should recover
as consensus incorporate vaccine data.”
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