(MENAFN - Khaleej Times) Dubai's shares rallied to the highest since October on Sunday on rising investor optimism ahead of a crucial decision expected next week by MSCI about an upgrade of the UAE to "emerging" market status.
Boosting the upbeat investor sentiment was a decision last week to raise federal government employees' salary by up to 100 per cent. Analysts believe that the prevailing optimism is set to ride higher on news on Sunday that the UAE Cabinet has approved a new draft companies law that is designed to boost foreign ownership in select sectors.
Sunday's stock market rally in Dubai came amid a recovery by global markets after European central banks moved to ease the region's debt crisis.
The Dubai Financial Market General Index rose 1.8 per cent to close at 1,404 points, its highest finish since October 31. Abu Dhabi's index also rose, up 1.2 per cent to 2,473 points. Banks also showed an upturn with First Gulf Bank up 5.3 per cent, National Bank of Abu Dhabi and Abu Dhabi Commercial Bank each rising 2.8 per cent. Emaar Properties, one of the largest developers in the region, climbed to the highest since August 29 after two bankers said the developer agreed on an 800 million Islamic loan that costs less than its sukuk. Arabtec Holding rose 3.4 per cent and Drake & Scull International rose 4.8 per cent. The DFM General Index added 1.8 per cent to 1,404.34 at the 2.00pm close in Dubai. Abu Dhabi's gauge rose 1.2 per cent. Egypt's benchmark dropped 0.4 per cent.
Morgan Stanley Capital International, or MSC, said it would announce on December 14 its decision on whether to upgrade the UAE and Qatar to "emerging market" status from "frontier status.
The UAE and Qatar may be raised to emerging market status at MSCI after the index provider delayed the decision in June. The two Gulf states are currently bracketed as frontier markets alongside financial lightweights such as Vietnam, Kenya and Slovenia.
An increase in the foreign ownership limit at First Gulf Bank from 15 per cent to 25 per cent was the latest sign of progress being made in meeting the index provider's requirements ahead of it long awaited decision. Experts believe the status upgrade is expected to spur fresh capital inflows to both markets, currently shunned by institutional investors. Some even estimate that Qatar and UAE could receive inflows of 600 million once they gain the enhanced emerging market status.
Stock market analysts said substantial pay increases ordered by the President, His Highness Shaikh Khalifa bin Zayed Al Nahyan, for all federal government employees last week as the country marked its 40th anniversary had gone a long way to lift optimism. The President also ordered the creation of a fund valued at Dh10 billion to help citizens meet loan obligations, triggering sharp gains by banks.
Across the Gulf, Qatar's QE Index (DSM) increased 1.1 per cent and Oman's advanced 0.5 per cent. Kuwait's measure lost 0.1, while Bahrain's BB All Share Index (BHSEASI) was little changed.