The UAE stock markets were the second-best performing stock market in 2022 and the best in US dollar terms, up 37 percent, recent research showed.
Interest in the country’s stocks is likely to continue this year as 11 IPOs are planned for this year.
“The interest in the local market over the past year has been a result of the region’s success in listing many of the national companies. In 2022, GCC’s share of global IPOs rose to 23 percent, with the UAE topping the list with 12 companies raising $11 billion,” Ritu Singh, regional director of StoneX Retail, told the Khaleej Times in one Interview.
The UAE is attractive because the shares are denominated in dirhams, which are pegged to the dollar, so there is not much exchange rate risk like other non-US dollar-pegged emerging markets, Singh said.
“Furthermore, as oil demand is expected to hit a record high in 2023, according to the International Energy Agency, the region and the UAE will continue to experience budget surpluses, which will be reflected in their financial markets,” she added.
StoneX Group Inc. is a Fortune 100 company with a proven track record of nearly 100 years, serving more than 50,000 commercial, institutional and payments customers, and more than 370,000 individual customers from nearly 80 offices on six continents. StoneX Group operates a global financial services network that connects companies, organizations, traders and investors to the global market ecosystem through a unique blend of digital platforms, end-to-end clearing and execution services. The Company provides its network, products and services to enable clients to take advantage of trading opportunities, manage their market risks, make investments and improve their business performance.
From a macroeconomic perspective, the global economy is expected to continue to slow down in 2023. Though the pandemic itself has somewhat subsided, its impact still weighs heavily on many countries struggling to recover. Europe, the UK and to a lesser extent the US are all prone to slipping into recession in the coming year, while growth in emerging and developing Asia is likely to be more resilient. Dire scenarios await if, despite rising interest rates, inflation remains stubbornly stuck at 5% – or worse – surges past 5%, confirming the International Monetary Fund’s forecast that “the worst is yet to come ,” StoneX Research indicates.
Regarding commodities, Singh believes that as long as there is high demand and low supply, prices will rise. “Inflation could give commodity prices a tailwind provided demand continues to exceed supply,” she said. Analysts at Forex.com (a subsidiary of StoneX) closely link commodity prices to geopolitics, especially after 2022, when a mix of supply chain shortages, war and demand-driven inflation created ripples in financial markets. “Today, oil prices are caught between fears of a global slowdown, a raging conflict between superpowers and Opec’s desire for higher prices. However, oil is more likely to close higher than lower in 2023,” Singh said. With China reopening and Opec’s support, Forex.com experts estimate that the commodity price will range between $60 and $110 this year. “So what we’re likely to see is that the ongoing volatility will be affected by a variety of factors,” Singh said.
For global indices, 2023 looks set to be just as tumultuous, if not more so, than 2022. Analysts expect the sharp tightening of central bank policy to become less aggressive before rate hikes are suspended altogether and potentially reversed in the latter parts of the year. Inflation may remain stubborn and the global economic slowdown is likely to deepen, holding back consumer spending. Although European indices rallied strongly in the fourth quarter, it is doubtful whether equities can continue their rise. With the central bank-induced recession expected in early 2023, European indices could fall in the first half of the year before embarking on a slow, protracted recovery in the second half. “People are on the fringes and the reactions are more extreme and that defines volatility,” Singh said.
While online commerce gained a lot of momentum during the pandemic, Singh believes the spike in every area of consumer interaction will flatten out a bit. “Those clients who have not yet done so will recognize that this is an opportunity and a convenient way to dabble in the markets and add the internet to their portfolio. That knowledge and notoriety will not be taken away from us,” she said. “I think we’ve created a space that will continue to engage in the future as investors understand it’s a path available to them. More and more people will make investment decisions themselves and get control into their hands,” she added.
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