Gulf state sheltered from regional turmoil says Templeton boss
Dubai’s stock market, now in the midst of a bull run, will attract more institutional investors as its property market recovers and the UAE remains sheltered from regional turmoil, Mark Mobius said.
“Because of political turmoil you see money coming into Dubai in search of safety,” Mobius, who oversees about US$50bn as executive chairman of Templeton Asset Management’s emerging markets group, said at an interview in Bloomberg’s Dubai office on March 8. “It’s definitely going to dawn on institutional investors.”
The Dubai Financial Market General Index surged 4.7 percent yesterday, the most since December 2009, to 1,686.66, bringing the advance from a low in January to 30 percent. Last month, the benchmark surpassed the 20 percent threshold some consider the beginning of a bull market, and had the top monthly gain among benchmark equity indexes worldwide.
Dubai and its neighbor Abu Dhabi, holder of 7 percent of the world’s oil reserves, have emerged as safe havens in the Middle East and North Africa after a wave of popular uprisings ousted leaders in Egypt, Tunisia and Libya last year. The turmoil, which reached countries including Syria and the Arabian Gulf’s Bahrain, barely affected the UAE, the second-biggest Middle East economy. Dubai and Abu Dhabi are among seven sheikhdoms that constitute the UAE.
“We’ve got all this money floating around; the first home is the biggest markets,” Mobius said. “Then they look at emerging markets, which is why they are outperforming again, and then they look further afield into so-called frontier. This is where the Middle East comes in.”
Stock markets in Abu Dhabi and Dubai, home to the world’s tallest skyscraper and an artificial island shaped like a palm frond, gained this year as companies posted improved earnings and after Dubai said it expects two of its main companies to refinance debt without government help. Dubai stocks tumbled 17 percent in 2011 on the heels of the Middle East uprisings, out- performing the 49-percent drop in Egypt benchmark.
“Dubai has become a very interesting symbol of the Middle East,” Mobius said. “We continue to add because we get more money coming in,” he said, referring to stock markets in Dubai, Saudi Arabia and Qatar.
Dubai’s stock market dropped in 2010 and 2011 as the emirate contended with a real-estate crash that pushed home prices down more than 60 percent from a mid-2008 peak. Abu Dhabi extended an US$20 bailout to Dubai in 2009 to help its businesses restructure debts. Its state-linked companies face about US$10.3bn in debt repayments this year, according to Bank of America Merrill-Lynch estimates.
Home prices have stabilized in Dubai and in Abu Dhabi, the government said in January it plans to resume projects, including branches of the Louvre and Guggenheim museums, after reviewing their viability. Abu Dhabi real estate prices fell 45 percent from 2008 peaks. The ADX General Index, down 12 percent last year, has advanced 7.7 percent so far in 2012.
“The boom is already beginning,” Mobius said. “The property market is beginning to move again and the capital markets are going to be growing. I think you are going to see a lot more people coming, in particular if Saudi Arabia opens up.”
The value of shares traded in Dubai has also improved, with AED981m (US$267 million) exchanging hands on March 5, the highest since April 2010.
Saudi Arabia’s Tadawul All Share Index, the region’s biggest bourse, has rallied 17 percent so far this year amid speculation the bourse will open up to foreign investors. The kingdom’s Capital Market Authority is in talks with international banks to open the nation’s stock exchange to foreign investors early in 2012, three bankers familiar with the matter said in October. Foreign, non-Arabian Gulf investors currently can’t directly invest in Saudi shares.
Saudi Arabia, the Arab world’s largest economy, permits non-resident foreigners to trade through share-swap transactions and exchange-traded funds, with the market regulator approving the first ETF in March 2010. The government allowed citizens of neighboring Gulf states to trade in shares in 2007.