Dubai stocks are out of the trenches — at least for now: The two-week ceasefire sent Dubai equities up 6.9% yesterday, after staging their biggest intraday rally (+8.5%) in twelve years. Despite the green screens, analysts warn us that a long-term recovery will be a long haul.

Don’t mistake a rebound for a breakout: “While [yesterday’s] bounce is a welcome reaction, near-term volatility is expected as investors await the final terms of a long-term peace [agreement] and analyze how a shifting geopolitical landscape will impact various sectors over time,” Junaid Ansari, director of investment strategy and research at Kamco Invest, tells EnterpriseAM. “We are yet to see any change in the physical market,” he added.

IN CONTEXT- The rally comes weeks after war-driven jitters sent regional markets into a tailspin, triggering foreign outflows and turning UAE equities into a cold trade. The DFM bore the brunt of the selloff due to “its higher retail flows and cyclical sectors,” Head of Research at Ubhar Capital Tahir Abbas has recently told us. That divergence showed up clearly in March, with the DFM down 16.4% versus an 8.9% decline on the ADX as foreign investors pulled roughly AED 1.06 bn.

A coiled spring uncoils

Turnover picked up yesterday on the DFM, with 626.8 mn shares changing hands, generating some AED 2.4 bn in value across more than 40k trades.

Investors piled into the most war-sensitive asset class. Real estate (+11.6) led sector gains on the DFM, with industrials (+7.4%) and utilities (+6.9%) close behind. Financials (+5.7%) and staples (+5.3%) also posted gains.

The rally was led by a mix of speculative plays and core market proxies: Ekttitab Holding (+14.9%), REIT (+13.7%), and Shuaa Capital (+13.4%) all posted sharp double-digit gains, while Emaar Properties rose 12.9% on more than AED 1.1 bn in traded value.

The ADX, which had been holding up better than its Dubai counterpart, also closed in the green yesterday, posting a 2.8% increase, according to market data. Some 589.3 mn shares changed hands for AED 2.6 bn.

Gains on the ADX were more broad-based. Real estate (+9.9%) led the move, followed by healthcare (+5.6%), technology (+4.1%), industrials (+4.0%), and energy (+3.8%). This points to a more balanced recovery across sectors, with defensives and growth names moving in tandem.

“Markets found much-needed relief [yesterday] as a pause in tensions allowed oversold sectors like real estate and transportation to rebound,” Ansari tells us. “Conversely, the energy and petrochemical industries saw declines as the war premium faded,” he added.

Markets are ahead of the curve

“Investors are viewing the UAE more as a temporary dislocation [...] especially after the ceasefire,” Christy Achkar, financial market analyst at CFI Dubai, tells EnterpriseAM. “Markets may now price in a bit more caution going forward, meaning stability is expected, but with less overconfidence than before,” she added.

The real economy is lagging: While the stock market priced in peace, the actual infrastructure, crude output, petchems, and logistics will need more time to normalize, Ansari tells us. “Confidence in sectors like tourism and real estate will also take time to get restored,” he added.

We may also benefit from a shift in regional flows as oil prices pull back: Since neighboring Saudi markets are more directly tethered to oil revenues, the softening of crude prices makes UAE stocks look more attractive on a relative basis. “Investors are likely to gradually rotate some flows back into UAE equities [which are] more sensitive to improving risk sentiment and capital inflows,” Achkar said.

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