Big funds sit out UAE rally, wary on Dubai rescue

* username: rupertbu

Institutional investors are sitting out the recovery on UAE stock markets, wary about Dubai's debt rescue proposal and hesitant about prospects longer term, analysts say.

Broader issues like liquidity and market breadth may prevent foreign institutions from coming back to UAE exchanges, which are dominated by property and banking stocks that are closely linked and which lack defensive counters.

In addition, UAE is not included on the MSCI Emerging Markets Index .MSCIEF against which large institutional funds benchmark their performance, meaning many fund managers cannot buy UAE stocks regardless of how attractive valuations are.