US-China trade war to impact UAE, GCC equities

UAE equity markets are expected to extend declines when they resume today following the plunge in US markets on Friday after President Donald Trump imposed more tariffs on Chinese products.

Analysts said the UAE and other regional markets will remain under pressure during the coming days amidst heightened tension between the world's two largest economies on tariffs.

"I see a lot of turbulence in UAE equity markets. The more aggressive buyers go on hold, the more the negative perception will be for the equity market outlook. In the UAE, we are already seeing volume slowdown even further, mimicking what is happening in the US," said Issam Kassabieh, an independent market analyst.

"Among other indicators, US equities have rapidly grown over the past year and now everybody is talking about a potential recession; you could start seeing dips here and there."

As a result of another tit-for-tat between the US and China, US equity markets plunged on Friday and pushed investors to safe-haven gold. It is expected that US markets will decline further when they resume trading tomorrow.

Kassabieh said the main focus will definitely shift to gold as equity markets will drop. He noted that banking stocks are the only positive in the Gulf region and the consolidation witnessed in the financial sector will expand to other sectors as well.

"There is a lot of negative news about the insurance sector so consolidation will be triggered in that specifically. Over the next year, if we don't see any improvement in real estate margins, we will see consolidation in that sector as well. The only upward trend I see in the UAE and the GCC is consolidation," Kassabieh added.

Iyad Abu Hweij, managing partner at Allied Investment Partners, earlier said that UAE equity markets will continue to be impacted by growth in the global economy and regional geopolitical developments. "We are seeing signs of an economic slowdown in major markets around the world," he said, adding that UAE markets are set to end the year on positive footing.

"In terms of second-half performance, the Dubai index will be looking to move past the 3,100 level. The Abu Dhabi index is on track to move past the 5,500 level, making modest gains towards the end of the year," he said.

The Dubai and Abu Dhabi indexes closed at 2,768 and 5,039, respectively, on Thursday.

He expects banking and insurance sectors to continue to dominate in terms of performance in the second half of the year.

"Over the next six months, I would particularly look out for Abu Dhabi Commercial Bank and Emaar Properties. Both stocks provide impressive dividend yields and have a P/E ratio below their respective market's P/E ratio.

The Dubai and Abu Dhabi bourses gained 5.09 per cent and 1.32 per cent, respectively, in the first half of 2019.