UAE stocks contain fear of coronavirus for now
CONCERNS STILL LINGER OVER ITS IMPACT ON OIL-DEPENDENT ECONOMIES
While UAE stock markets have contained the worst of the virusinduced volatility, no one is celebrating as yet.
The risks are higher as stocks in the UAE, as with other Gulfbased markets, are highly susceptible to any volatility in oil prices. Crude dropped 16 per cent since China identified the Coronavirus, and wiped out all the gains made by UAE since the start of the year. These are currently trading in the red.
According to Hasnain Malek, head of Equity Strategy at Tellimer in Dubai, said Gulf growth remains “quite anaemic”, while adding that while stocks in Dubai are cheaper, they’re still riskier.
But investors are not rushing to sell their holdings and rather taking it as an opportunity to enter emerging markets, analysts say. Especially those investors who missed last year’s rally.
While equities elsewhere have remained calm on the virus outbreak after a brief initial jittery sell-off, a sizeable impact continues to be seen in commodities such as crude, which reflects concerns about the world’s factory — China — grinding to a halt.
Analysts and economists alike are increasingly cautious as the outbreak has still not peaked, and there are mixed reports coming out of China in relation to when production can be resumed in some of key regions. “While the latest death toll is surpassing 1,000 and the number of confirmed cases is now over 45,000, there seems to be no imminent solution to the spread of the virus,” said Simon Ballard, chief economist at First Abu Dhabi Securities. “All of which will likely put an increasing strain on regional economies over the coming months.”
Wider economic hit
According to estimates by Warwick McKibbin, professor of Economics at Australian National University, the wider economic hit from this virus could be three to four times bigger than the $40 billion (Dh147.12 billion) blow it took from Sars in 2003.
With Dubai already grappling with oversupply in the property market, analysts said flight disruptions to China are seen to affect the UAE’s transport and logistics stocks. But any impact would be limited given that these stocks aren’t that volatile. (The transport and logistics sector makes up about 8 per cent of the nation’s non-oil economy, according to Emirates NBD.).