High oil prices draw foreign money to UAE stocks

Buoyant oil prices are seen supporting equity markets in the United Arab Emirates on Sunday as foreign investors increase positions, with high-yield banking stocks their primary target.

Dubai's index has gained 14.6 percent this year to be the top performing Gulf benchmark, but buying momentum eased last week, its first negative trading week of 2013.

The measure followed a similar pattern last year, when an early-year surge petered out from early March, but the 2013 rally is more convincing, says Sebastien Henin, portfolio manager at The National Investor in Abu Dhabi.

"It's very different from last year, which was extremely speculative with movement in penny stocks and high-beta names - this time it's mainly driven by bluechip stocks and there's a lot of foreign investor interest," says Henin.

Brent crude ended Friday at a nine-month high of US$118.90, helping underpin foreign investor interest in UAE equities, Henin says.

"This will be the main theme in the coming days," says Henin. "We're starting to see sector rotation towards banks and that should continue - bank results were pretty good and their dividend yields are extremely attractive in the current world of low interest rates."

Dubai ended Thursday at 1,860 points, comfortably above an important psychological support level at around 1,790 points, while Abu Dhabi's benchmark is at a 34-month high.