The UAE equity markets have been shown interesting activities recently. The prior market expectations were quite bearish. Projections pointed to a corrective index wave that could place equities to the 1700-1750 area. However the UAE market performed otherwise which lead in the direction of more upside local equities.
In late March the market faced corrective wave. Though the recent days, equities shifted their direction into a rally. The major factor for the bull recovery is the return in foreign buying activity. All the previous equities rallies were fanned by foreign influx. Therefore the scale of the influx is crucial for the UAE market trend determination.
Since 2008 the foreign investment is the major driver which triggers all the bull and bear trends on the market. The disregard of this foreign tendency proved to lead only to poor investments and lost opportunities.
There is not reliable explanation why foreigners returning into the UAE market. Moreover the world events suggest a risk-off mode on track. One of the possible reason is believed to be a season earning strategy.
In the upcoming days UAE will announce the Q1 financial results and it very likely to witness more foreign purchase before the report.
There is an important statistic which should be taken into account. The recent rally has been conducted by small-scale stocks. This could arrange the setting for an overtake move by the large equities. Something similar has been witnessed at the beginning of the 2013.
However it is a very hard task to determine how far the rally could go. Though, as long as the foreign investors remain net buyers the UAE equities will thrive.
The emerging independent financial network in the Emirates has a strong and influential presence. And that is namely among the foreign investor community. Gulf-based financial advisors are also adding to a setting of increasing risk tolerance. Therefore advisors are capable of pouring more investment into the equity product from the Emirates.
The flow of foreign capital to the Gulf Region could slow over time. However economically attractive centers like UAE, Qatar and Saudi Arabia are expected to maintain their attractiveness. These countries remain the most popular investment venues and are all poised to experience consistent growth during this year.
