The most common way to invest in the UAE stock market is by opening a stock brokerage account with a local broker registered on one of the 3 UAE stock exchanges (DFM, ADX or Nasdaq Dubai). Investors also need to apply for a NIN investor number at the DFM to buy stocks on any of the listed exchanges.

However, if you are an expat or tourist and want to gain exposure to the UAE’s vibrant economy, the most straightforward way to buy the best UAE stocks for your needs is through an ETF.

The downside is that country-specific ETFs for small countries such as the UAE usually have a higher expense ratio compared to ETFs for large markets like the United States, EU, or UK. Thus, you must carefully evaluate whether the excess return you expect will cover the higher ETF costs!

If you want to buy a specific UAE company, the best way would be to contact one of the local exchange members. The drawback is that you may have to incur foreign exchange fees.

ETFs – an alternative way to gain exposure

ETFs, or exchange-traded funds, allow you to gain exposure to a dozen or even hundreds of companies with a single investment. ETFs can be a good option if you:

• Are unsure which specific stock to choose;
• Want to limit your portfolio fluctuations (usually, ETFs invest in companies in several sectors affected by vastly different factors, limiting your exposure to idiosyncratic risks);
• Are interested in following a specific theme in your investments (UAE stocks, technology stocks, real estate stocks, etc).

iShares MSCI UAE ETF (UAE) – 100% exposure to UAE stocks

iShares MSCI UAE ETF (UAE) invests in 40 of the best UAE stocks listed on the local stock exchanges. The ETF distributes dividends, and its benchmark is the MSCI All UAE Capped Index (capped indices are good for diversification since they limit the share of any individual company to a certain amount). The expense ratio is 0.59%, while as of June 2024, the P/B ratio is 1.27, and the P/E ratio is 8.69.

Among the top holdings of the fund by weight as of June 2024, there are some of the largest UAE companies listed on the local stock exchanges, such as:

1. Emirates Telecom – 15.28%
2. First Abu Dhabi Bank – 14.18%
3. EMAAR Properties – 13.89%

These 3 top UAE stocks have a weight of over 43% of the ETF’s holdings that total almost $40M.

Final words

If you want to invest in the UAE stock market, you need to carefully consider which company or ETF to pick, as there is a myriad of companies to choose from. The local market has +120 listed shares, which is a decent size for a diversified portfolio.

Several international ETFs hold UAE stocks, providing a straightforward pathway for most individuals. Notably, the iShares MSCI UAE ETF (UAE) stands out as the largest among them.