One of the world’s fastest vaccine rollouts in Dubai is fueling one of its best stock rallies.
As the UAE pushes its inoculation program, the Dubai Financial Market General Index has climbed about 12 percent this year, trimming its 10 percent slump in 2020. Only two major markets have performed better this year.
“Vaccines are a prime reason for this,” said Divye Arora, a money manager at Daman Investments in Dubai. “We have seen a move globally away from growth and defensive toward value and cyclical. Dubai offers both value and cyclical exposure.”
The UAE, the third-biggest oil producer in OPEC, has administered more than two million coronavirus vaccine doses, inoculating nearly a fifth of its population, as it tries to emerge from the pandemic.The campaign is seen as key to reviving the economy of Dubai, which is reliant on income from travel and tourism.
The second-biggest emirate, Dubai, has seen the fastest increase in valuations in the Gulf since March. Its price-earnings ratio based on estimated profits in the next 12 months has jumped to 12.6 times from last year’s low of 4.8. That’s still cheaper than neighbouring Abu Dhabi.
The decline in the equity risk premium and “strong expected earnings growth starting in the second half of 2021 and through 2022 justifies the multiple expansion,” Arora said. Dubai’s shares lagged behind a broader recovery in emerging markets last year amid concern about the impact of the pandemic on hospitality and aviation.
Developing-nation stocks have risen to an all-time high this year, amid a flood of liquidity and optimism over a global economic rebound, surpassing levels last reached before the 2008 global financial crisis.
Earlier, it was revealed that Dubai’s handling of the coronavirus pandemic has helped boost consumer confidence levels in the emirate to a three-year high in the fourth quarter of 2020.
The Consumer Confidence Index rose to the highest level since the third quarter of 2017, with its score of 142 points increased from the 133 points in the same period last year and 132 points recorded in Q3 2020.
Scott Cairns, managing director of Dubai-based Creative Business Consultants, told Arabian Business that the vaccine rollout during January is likely to boost business confidence further not only in the UAE but among overseas investors looking at the country as part of a potential expansion plan.
He added: “Whilst we are still waiting to see the vaccine be mass-deployed, we anticipate it will enhance the travel and tourism industry rapidly once we approach our much anticipated events season. With Saudi Arabia introducing a health passport, we would anticipate this may become commonplace in the region, again bolstering travel, tourism and most certainly business.”
The UAE is home to about 10 million people, mostly foreigners, and has the second-highest per-capita inoculation rate in the world after Israel.
The country has approved a vaccine developed by China’s Sinopharm, as well as Pfizer and BioNTech’s shot, and has since rolled out an aggressive vaccination campaign.
* With Bloomberg
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