Poor analysts. Every time they have hinted at the green shoots of recovery, an avalanche of bad news has demolished all hope. So can we believe their call for a year-end rally?
November 3, 2011
03 November 2011 Poor analysts. Every time they have hinted at the green shoots of recovery, an avalanche of bad news has demolished all hope. So can we believe their call for a year-end rally? Poor analysts. Every time they have hinted at green shoots of recovery, an avalanche of bad news has wiped out all hope. So can we believe their call for a year-end rally?
But first a word of caution: Like all stock market stories these days, this one could well have a shelf life of exactly 24 hours.
It was only last week when most analysts had heaved a collective sigh of relief on signs of a concrete European solution. Traders were talking about a year-end global relief rally, building on an excellent October to make up for a pretty forgettable year.
By Tuesday morning traders were running for cover, as the Greek government dropped a bombshell that it would seek a referendum on the austerity measures, leaving the Germans - who are essentially footing the bill - fuming.
Here in the Middle East there are also grounds of hope and murmurs of a market rally. MENA markets were quite positive last week, with Saudi Arabia and Qatar gaining substantial ground.
A Markaz report study noted that last week 62% of the 13 corporate research reports had Buy rating, 31% Hold and only 8% issued sell recommendations.
Emboldened by favourable winds, Shuaa Capital has put forth the idea of a year-end rally for UAE markets.
Its 5 reasons:
1. Clear exhaustion followed by strong pick up in buying power;
2. Foreign institutions representing the main net buyers during the high-volume rally last Thursday (again, not conclusive but definitely indicative). Building positions ahead of the week-end should not be taken lightly;
3. A European resolution that should, hopefully, buy enough global comfort time until the beginning of the year (this is when European leaders are expected to discuss the nitty-gritty of their bailout plans, hence, the time for potential hiccups);
4. Signs of positive re-coupling among and between regional and global equity markets;
5. Lagging regional equities in a global risk-on environment that favors stocks;
In short, Shuaa Capital analyst Adel Merheb is calling for a 13-16% gain in Dubai Financial Market Index by the end of the year.
