MIDEAST WEEKAHEAD-Borrowing to buy leaves UAE markets volatile, maybe vulnerable | Reuters

MIDEAST WEEKAHEAD-Borrowing to buy leaves UAE markets volatile, maybe vulnerable | Reuters:

"* Surge in retail activity supports Dubai rally

* UAE citizens heavy buyers

* Many using margin loans as leverage

* Large price swings increasing

* Questions over strictness of regulation

By Nadia Saleem

DUBAI, Sept 3 (Reuters) - A surge in lending to investors by brokerages in the United Arab Emirates has helped make Dubai the world's second-best performing market this year, but has left it prey to volatility.

Some investors have been able to make profits in the range of 40 to 60 percent this year on local stock markets but the question is whether such margin lending - borrowing with cash or holdings as security - is setting the region up for trouble.

The trend is developing as the UAE prepares for a fresh influx of money from foreign institutional investors next year after index compiler MSCI decided to upgrade it to emerging market status from June 2014.

"Cash is coming back to the market where there are big gains to be made - this year has been good," said Asem Alsaifi, manager of a 1.5 billion UAE dirhams ($408.39 million) portfolio for a private Dubai company."

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