UAE investors will never learn how to properly grasp the emirates’ financial and property markets because they don’t stay in the country long enough, the influential CEO of Daman Investments has said.
Shehab Gargash said the high number of expats dabbling in the UAE stock exchanges and buying property have short memories, making the markets more volatile.
“The UAE investor rotates a lot. Remember the vast majority are non-national ... therefore you’ve got a refreshment of your population every decade and therefore they will act in a manner of approaching the market for the first time ever,” Gargash said during an annual press briefing on Tuesday.
“So there are lessons to be learned but I’m afraid we are not going to learn them - not now and not ever.
“The market will be more volatile than usual because that’s the nature of the UAE market and, as such ... the successful investor in the UAE market is one who can read those patterns well.”
Gargash believes the UAE markets have returned to positive territory and the gains are only the beginning of a “multi-year bullish cycle”.
Daman Investments is predicting double digit growth in UAE financial markets this year, with both the Dubai Financial Market and Abu Dhabi Securities Exchange already surpassing their 2009 peaks.
Gargash said he was not surprised average Dubai property prices had increased by about 20 percent because they were coming off a significant fall. Some properties lost most than 60 percent during the bust.
“I think the reason we saw the fall in the stock market and also the real estate market is that they were pushed up to untenable levels,” he said.
“It’s a pendulum: whenever you stretch too far, you have to come back. If you stretch it extremely too far you will come back with a zoom.
“It is a feature of any cycle, anywhere in the world: investors will overreact, push the boundary too much, you will get a retraction, people will get burned and then it will start all over again. I don’t see anything wrong with that, it’s just a feature of the market.
“The UAE tends to be a little more ‘absolutest’ in the way it reacts – it is more extreme; when things are bad they’ll be extremely bad, when things are good they’re extremely good.”
In other comments, Gargash said banks had begun to lend again and their high liquidity was “extremely encouraging”.
“This will be a key driving factor for the return of activity in this sector and I think we’re going to see it ... with a positive vengeance,” he said.
Inflation also was steady. Daman Investments expects inflation to be 1-1.5 percent for 2013.