Markets in the United Arab Emirates are likely to be steady on Sunday as bullish first-quarter earnings support this year's equity price gains and investors await MSCI's upgrade to come into effect next month.
The Dubai and Abu Dhabi benchmarks are up 54 and 17 percent respectively this year, but a sustained rally has showed signs of faltering in recent weeks, with Dubai 3.4 percent below May 6's six-year peak and Abu Dhabi 3.7 percent shy of April 23's eight-year high.
Heavyweight stocks including Emaar Properties and Aldar Properties posted above-forecast first-quarter profits to bolster market sentiment.
"Growth in most companies' earnings exceeded expectations," says Mohammed Yasin, managing director of NBAD Securities.
"That usually means fund managers and analysts will review their forecasts for the rest of the year and from that attract more liquidity, but with such a large move we have to be selective. You can't keep buying across the board."
Late Wednesday, index compiler MSCI announced which UAE stocks, as well those in Qatar, would be added to its emerging market index, with June 1 the first day's trading where these changes will be in effect.
The likes of Emaar and Abu Dhabi Commercial Bank were considered certainties to be included, but many investors also made failed bets on smaller companies such as Union Properties and Deyaar making the cut.
These tumbled following Thursday's announcement, with Union Properties and Deyaar falling 3.3 and 4.6 percent respectively, and further selling is likely.
"We're seeing a separation between the long-term value investors and the smaller day-trade investors who have been playing with these shares," says Yasin.
He forecasts the UAE benchmarks will tread water until the MSCI upgrade comes into effect, but expects individual stocks to be volatile within the broader flat trend.