Dubai stocks surge as UAE pushes ahead with vaccination drive

One of the world’s fastest vaccine rollouts is fueling one of its best stock rallies.

The Dubai Financial Market General Index has risen by around 12 percent this year as the United Arab Emirates is advancing its immunization program against COVID-19. This marks a reversal of its 10 percent slump in 2020.

“Vaccines are a prime reason for this,” said Divye Arora, a money manager at Daman Investments Psc 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 (Organization of the Petroleum Exporting Countries), 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 in the UAE, 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 neighboring 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,” Ms. 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.

The Dubai Financial Market General Index rose 1.4 percent on 20th January to reach the highest level in almost a year.