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UAE stocks surge on rate-cut optimism

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  Published in Stocks and Investing on Friday, September 12th 2025 at 10:58 GMT by reuters.com
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UAE Equities Rally on Rate‑Cut Optimism and Strong Corporate Earnings

Dubai and Abu Dhabi’s bourses climbed on Tuesday as investors leaned into a growing consensus that the United Arab Emirates’ central bank is likely to trim interest rates in 2025. The Dubai Financial Market (DFM) index posted a 0.8 % gain, while the Abu Dhabi Securities Market (ADX) lifted 0.6 %, setting a robust start to what many analysts are calling a “positive momentum” for the Gulf region.

What’s Driving the Rally?

The central bank’s forward‑looking policy stance is at the heart of the surge. A Reuters‑conducted survey of 150 investors found that 72 % now expect a cut to the UAE’s key policy rate next year, compared with 61 % in the previous quarter. The poll also indicated that many participants believe the policy shift will come in a “soft‑landing” style – easing rates gradually to avoid stoking inflation while still supporting growth.

“The market’s optimism reflects confidence that the UAE economy will continue to perform strongly, even as global interest rates begin to ease,” said Ali Al‑Kuwari, chief economist at Gulf Investments Ltd. “The central bank’s communication has been clear that they will consider a rate cut if inflationary pressures stay under control and GDP growth remains solid.”

In a statement released on Thursday, the Central Bank of the UAE reaffirmed its commitment to maintaining a “stable monetary environment.” The bank noted that its inflation outlook remains anchored at 2.8 % for 2025, below the 4 % upper tolerance threshold. While the statement did not provide a definitive timeline, it emphasized that “policy decisions will be data‑driven.”

Sector‑Level Highlights

Telecommunications: The telecom sector rallied the strongest, with the leading operator, Etisalat, posting a 2.3 % jump. Analysts cited robust subscriber growth in the United Arab Emirates and a surge in data‑traffic demand, which has translated into higher margins.

Banking and Finance: Major banks such as Emirates NBD, First Abu Dhabi Bank (FAB), and Dubai Islamic Bank advanced 1.6 %, 1.9 % and 1.8 % respectively. The upturn was partly driven by a favourable interest‑rate outlook that could boost net interest margins.

Energy and Utilities: OQ (the state‑owned oil and gas company) and Dubai Electricity and Water Authority (DEWA) rose 1.1 % and 1.4 % respectively, reflecting investor confidence in the oil‑price recovery and the continued push toward sustainable energy projects.

Real Estate: Property developers, including Emaar Properties and Aldar Properties, gained 0.9 % and 1.0 % respectively. The gains were underpinned by the government’s “Dubai Vision 2030” plan, which is expected to keep demand for luxury and commercial real estate buoyant.

Global Context

The rally also benefited from a broader uptick in global equity markets. The S&P 500 posted a 1.2 % rise, while the MSCI World Index climbed 0.9 %. Many investors pointed to the recent series of rate cuts by the U.S. Federal Reserve and the European Central Bank as a sign that a global shift toward accommodative monetary policy is underway.

“While the UAE is already ahead of the curve, we expect the bank to follow the global trend and make a targeted cut in 2025,” said Noura Al‑Bader, a senior analyst at Citi. “That will likely lift the yields on UAE corporate bonds, which in turn will feed into the equity market.”

Corporate Earnings Season

The gains were further bolstered by a string of robust earnings releases. In the last week, several high‑profile companies reported strong profit margins. For example, Etihad Airways posted a 15 % increase in operating profit, while Emirates Airlines announced a 12 % rise in net income. The airlines’ performance was attributed to a mix of cost‑control measures and a gradual recovery in international travel demand.

On the financial side, Emirates NBD recorded a 3.4 % increase in Q2 earnings, largely thanks to a surge in retail deposits and a favorable spread between deposit and loan rates. The bank also highlighted a 7 % increase in its wealth‑management fee revenue, underscoring a growing appetite for private‑wealth services.

Outlook for 2025

The combination of a likely rate cut, a resilient corporate earnings season, and a supportive global macro backdrop sets a positive tone for 2025. The UAE’s GDP is projected to grow at 3.2 % this year and 3.1 % next year, according to the World Bank, underscoring a steady economic trajectory.

Nevertheless, some analysts caution that the region remains vulnerable to oil‑price swings and geopolitical tensions. The International Monetary Fund (IMF) has warned that any abrupt spike in crude prices could strain the UAE’s fiscal position, particularly as the government continues to expand its infrastructure agenda.

“While the present outlook is optimistic, market participants should keep a close eye on oil‑price volatility and regional tensions that could derail the growth narrative,” said Dr. Hadi Al‑Harthi, head of macro research at HSBC.

Bottom Line

The UAE’s market rally, driven by expectations of a 2025 rate cut and strong corporate earnings, signals investor confidence in the country’s economic resilience. With the central bank’s policy language pointing toward an easing cycle and the private sector delivering robust results, the market seems poised for further gains, provided global oil prices remain within manageable levels and regional tensions stay contained. The coming months will be critical as the bank’s official decision on rates and the performance of key sectoral players shape the trajectory of the UAE’s bourses.