(MENAFN - Khaleej Times) The benchmark index of Dubai Financial Market (DFM) on Thursday recorded a nine-month high on expectations of improved earnings and bigger dividends.
The Dubai bourse started the new year on very positive note as its general index surged by 4.4 per cent in the week. The DFM index rose 0.9 per cent to close at 1,681.75 points, the highest level since April 5, 2012.
There are a couple of reasons for this bullish trend in stock market including good dividends, better earning expectations, and the country's picture look promising for 4-5 per cent GDP growth in Abu Dhabi and 4.5 per cent in Dubai, Mohammed Ali Yasin, managing director of National Bank of Abu Dhabi Securities, told Khaleej Times.
The stock markets in the country started upward trend from the first day of the trading day as DFM index gained 2.7 per cent and Abu Dhabi bourse jumped by 1.8 per cent.
Another reason is that investors are building fresh portfolio in the new year, Yasin added. Dubai Investments jumped by 2.9 per cent on the last day of the week and expected to announced full year financial results on January 30. Emaar Properties also reached a two-year peak. "Fresh capital is entering the market, chasing dividend paying stocks," said Nabil Farhat, a partner at Abu Dhabi-based Al Fajer Securities, told Bloomberg.
Shares in Gulf countries are luring investors as they pay more in dividends than emerging-market peers. Dubai's stock index, the best performer in the six-nation Gulf Cooperation Council last year, with a gain of 20 per cent, offers a dividend yield of 3.76 per cent, compared with 2.67 percent for the MSCI Emerging Markets Index, data compiled by Bloomberg show.
Dubai Investments last year surprised investors when it paid a cash dividend even after posting a 75 per cent drop in 2011 profit. The stock advanced to 90 fils, the highest close since April 5.
Emaar posted a decline in full-year net income in 2011 and paid a dividend of 10 fils per share, disappointing some investors. Emaar's net income probably rose 15 percent in 2012 to 2.07 billion dirhams (564 million), according to the average estimate of 11 analysts on Bloomberg.
"There is speculation Emaar's dividend recommendation this year will exceed the 10 fils paid last year," Farhat said. Higher dividends are "a sort of return on investment to please shareholders, as the government owns big chunks of these companies," he added.