Investment Review №329. It's time to take a risk

DFM General Index: 1-Year Dynamics

 

Abu Dhabi Securities Exchange Index: 1-Year Dynamics

Yield, Forward Rate 1m10y, UAE, 1-Year Dynamics

Brent Oil, 1-Year Dynamics

Between September 9 and 22, 2025, UAE stock markets exhibited positive trends, reflecting the improving fundamentals of the Emirati economy. The Dubai Financial Market (DFM) index grew by 1.5%, and the Abu Dhabi Securities Exchange (ADX) gained 1.8%. During this period, the price of Brent crude oil saw a 1.7% rise. These changes signal investor optimism, driven by revised GDP estimates, slowing inflation, and a rate cut by the Fed. For comparison, the S&P 500 index rose by 3.1% during the same timeframe.

Sector performances were mixed. The Financial sector witnessed a 1.4% uptick, while Real Estate experienced a slight decline of 0.08%. Among major companies, shares of Abu Dhabi Commercial Bank (ADCB) increased by 4.25% following a correction prompted by an additional issuance worth $1.5 billion. Conversely, Emaar Properties (EMAAR) stock decreased despite the announcement of possible retention of positions in India.

UAE Treasury bond yields declined by 58.2 basis points, whereas yields on U.S. Treasury securities rose by 2 basis points. Over the past month, there has been a decrease in UAE bond yields, with the spread over a comparable U.S. Treasury issue currently at 91 basis points, while the 5-year median spread is 43 basis points. The improved economic outlook for the UAE and expectations of a more accommodative monetary policy are prompting a reassessment of credit risks in the region.

Economic Updates

• The UAE’s Central Bank has revised its real GDP growth forecast for 2025 upwards to 4.9% from the previous estimate of 4.4%. This outlook is much more ambitious than the IMF’s forecast of 4%. The adjustment is attributed to anticipated increase in oil production and sustained robust growth within the non-oil sector.
• Inflation in the UAE is on a declining trend, as the Central Bank lowered its 2025 inflation forecast to 1.5% from 1.9%. This is attributed to reduced transportation costs and decreases in food and non-energy prices.
• The UAE’s tourism sector has experienced substantial growth, with hotels across the country hosting over 16.1 million guests in the first half of 2025. This marks an increase of 5.5% compared to the same period last year.

Corporate News

• Emaar Properties (EMAAR: -1.05%) has announced that it is no longer considering the sale of a stake in its Indian subsidiary. Instead, the company is now exploring joint ventures with major Indian firms, including the Adani Group.
• First Abu Dhabi Bank (FAB: +1.72%) has issued CNY 260 million in unsecured fixed-rate bonds maturing in September 2028. This issuance, which carries a 2% interest rate, is part of the bank’s $20 billion EMTN program.
• The Abu Dhabi Securities Exchange has listed the region’s first quantum computing-focused ETF under the ticker QUANTM. This marks the 17th ETF to be introduced on the ADX exchange.

Two-Week Outlook

In the coming weeks, market dynamics are likely to be influenced by the third quarter earnings season, particularly the results of major banks and real estate companies, as well as investor reactions to ALEC Holdings’ IPO, which will serve as critical determinants of market direction from a fundamental perspective. It’s also important to consider the persistent pressure exerted by fluctuating oil prices. From a technical standpoint, the ADX and DFM indices are trading above the 200-day moving average. However, they have not yet overcome the short-term bearish trend, indicated by the 50-day moving average. For the market to rebound to its July levels, a robust fundamental catalyst may be necessary. Meanwhile, the indices appear to be in an oversold condition, according to the RSI.