Investor Confidence Improves after Dubai World Episode

DUBAI — Investors in the UAE and across the Gulf are ending the year with a bit more optimism about chances of an improvement in the region’s economic conditions in the next six months, said investment bankers Shuaa Capital.

In its December GCC investor sentiment report, Shuaa Capital, the UAE’s biggest investment bank, said investor confidence was dented due to the November 25 surprise debt restructuring announcement by Dubai World. But optimism has returned, although only partially, after the repayment of a $4.1 billion Sukuk by Nakheel, PJSC, the conglomerate’s property unit.

It said there was a marked turnaround from the gloomy sentiment that prevailed after the November 25 announcement of Dubai World for a standstill on its debt obligations.

Dubai World has met its creditors to discuss its restructuring plans for $22 billion worth of maturing liabilities, with the final proposal likely to be submitted to lenders in early January.

Financial markets were roiled, as doubts grew over the government’s willingness to support distressed companies.

Shuaa Capital conducted two surveys, one before the Nakheel Sukuk repayment, and one after the debt was settled.

Prior to the payment, the GCC investor confidence index dropped by a hefty 32.7 points to slip below the 100 level at 98.1 points, compared to 130.8 points in November, with the UAE index declining the most at 82.5 points in December, from 129.3 points in the previous month.

After Nakheel repaid its Sukuk, the investor confidence in the GCC went up to 116.9 points, while the UAE index rose to 108.9 points.

However, the December GCC investor confidence index, and the UAE index, were still lower compared to November levels.

“Given that the UAE was at the epicenter of the Dubai World saga, the quick recovery made by the UAE index clearly indicates the resilience of the market,” said Oliver Schutzmann, chief communications officer of Shuaa Capital and author of the report.

“It is also evident from the report that investor confidence is much more robust than many media reports suggest, the professional investment community has a differentiated view on what has happened, and that the investment community continues to have a positive outlook on the economy of United Arab Emirates and the prospects of its stock markets,” added Schutzmann.

The Shuaa report showed that expectations for an improvement in GCC economic conditions on a six-month horizon were neutral in December after the Nakheel repayment, but most respondents polled, indicated they are still more likely to invest in GCC markets, rather than in global emerging markets and BRIC (Bazil, Russia, India, and China) markets, over the next six months.

Among regional stock markets, the UAE markets were viewed by investors as the bourses most likely to post strongest gains in the next six months, with 35.5 per cent of investors seeing the biggest rise in Abu Dhabi, 12.9 per cent were bullish about Dubai, and 13.1 per cent were upbeat about Nasdaq Dubai. All other regional exchanges, except the Saudi bourse, posted slight declines in their expected performance for the next six months, but all were deemed undervalued.

Among sectors, the six-month profitability outlook was strongest for the telecoms, media and technology sector. All sectors, except consumer and retail, and pharmaceuticals, are expected to either improve dramatically or stay flat.

Real estate, construction, and materials sectors are also to either improve their profitability or remain unchanged. 
— rocel@khaleejtimes.com