Dubai stocks enter bull market on cheap valuations

dubai — 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 January 21 low above the 20 per cent threshold for a bull market.

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 January 21, the lowest in four years.

“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.” Stocks are recovering from the worst start to a year since 2011 as oil climbs from the lowest level in more than 12 years.

Brent crude, a benchmark grade for half the world’s oil, rose 3.6 per cent to $34.19 per barrel at 3.55pm in Dubai. About 629 million shares changed hands on the main index, more than double the six-month average, according to data compiled by Bloomberg. The gauge closed at its highest level since December 6. Dubai Islamic Bank, the largest Shariah-compliant lender in the UAE, led the advance with a 3.7 per cent increase.

The gauge’s 14-day relative strength index, which dropped as low as 19.1 in January, rose to 65 on Monday, the highest since April. A level about 70 indicates to some investors a security may be overbought.