Dubai The iconic Charging Bull on Wall Street has not seen share prices like these since the onset of the global financial crisis in May 2008, four months before the collapse of Lehman Brothers.
The Dow Jones Industrial Average hit a key milestone on Tuesday, crossing the 13,000 mark, and the Dubai Financial Market General Index (DFM) is enjoying its own bull-rally with local stocks up 33 per cent from their January 16 low.
However, analysts say the DFM is still a long way from reaching pre-crash levels as confidence in the local economy slowly returns following a flurry of strong corporate earnings.
"Though we clearly are influenced by international markets, I think oil prices are the most influential factor when it comes to appetite for regional equities," said Sulaiman Aboulhosn, associate fund manager at Al Masah Capital.
"With oil continuing higher, GCC economies will secure their budgets and spending programmes — stimulating the real economy — and the spill-over into equity markets will be almost certain over the medium term. I do not think 2008 levels are within reach anytime soon. But given the current situation, I am very hopeful that UAE markets will show big gains on a year-on-year basis," he added.
Aboulhosn says the DFM is seeing volumes pick up far beyond trailing three-month and six-month averages, an important factor in any rally.
"This rally has the potential to extend higher, supported by valuations which remain low in terms of earnings multiples and a drastically improving sentiment. Nevertheless, it is a bit early to say for sure since many stocks are technically still trading within major bear trends and need to form bases before starting new bull trends," he said.
"It is very hard to pinpoint the exact catalysts. For example, the magnification of Europe's debt crisis can definitely hit UAE markets hard since liquidity will be in jeopardy.
"On the other hand, buoyant oil prices can counter that effect since GCC governments will have significant surpluses that can be pumped back into local banks and development projects," he added.
The DFM reached 6,000 in October 2008 but the peak of its powers was actually in November 2005 when the index crossed the 8,400 mark.
Real estate companies comprise a key element of the bourse and firms in that sector saw their share price plummet when Dubai's property market softended in 2008.
Some analysts believe it is unlikely Dubai's bourse will see a sustained upturn in fortunes until the city's real estate and banking sectors return to full health.
"If the year ends with a modest recovery and a marked improvement in trading volumes, Dubai will be in a good place," said Saeed Hirsh, an analyst at Capital Economics. "With Iran tensions, domestic problems in the UAE's banking sector and the Eurozone's debt troubles, I think we are still very far from 2008 levels," he added.
"For this to be sustained, these three elements have to continue to work in Dubai's favour. While the government cannot control global events, I think it should focus on dealing with the first two drivers, so continued spending and ensuring that Dubai's debt is sorted, without burdening the banks with more restructuring," he said.
Hirsh says the current rally has to be put into context as equity values are still a fraction of their highs over the past five years, adding the recent boost in the market is a reflection of three factors including certainty around Abu Dhabi's spending plans, renewed hope over Dubai and its related entities being able to refinance their debts and a general improvement in global economic sentiment.
"The Gulf's markets are not even similar to many other emerging markets. Any investor into the region's markets, including the DFM, would most probably be looking for exposure to oil. The problem is that they are unlikely to get it, he said.
"Instead, they are exposed indirectly through companies that are theoretically benefiting from oil proceeds, such as banks and real estate/construction firms. However, the exposure has been disappointing at best. And as long as these companies are fundamentally driven by the cycles of government spending and oil prices, the local stock markets will also move accordingly or remain subdued," he added.