DUBAI: Dubai’s share index rose 1.6 percent to close at a five-year high after the emirate was chosen to host World Expo 2020, but the market closed far off its intra-day high, suggesting many investors feel it is already fully valued for now.

The emirate will be the first Middle Eastern location to host the world’s fair, which will trigger billions of dollars of investment in coming years. Real estate and hospitality firms will benefit from Expo-related infrastructure spending in the long term. (Full Story)

There may be immediate gains for economy; investment bank EFG-Hermes raised its 2014 gross domestic product growth forecast for the UAE to 5.4 percent from 4.5 percent, citing an Expo-related boost to investor confidence among other factors.

But while Dubai’s index rose as high as 3,020 points during the day, climbing above 3,000 points for the first time since November 2008, it gave up most of its gains to finish at 2,946.

“Some investors were expecting more of a move today, but the announcement was not a big surprise for the majority of regional investors,” said Sebastien Henin, portfolio manager at The National Investor.

Many funds believe the Expo impact is already largely priced into the stock market which is close to full valuations for now. The latest monthly Reuters survey of Middle East investment firms found a third expecting to cut their allocations to UAE stocks in the next three months, while a third expect to raise allocations and the rest to keep current levels.

Fund managers recall that Qatar’s stock market rose 16 percent in the four months before it was awarded the right to host the 2022 soccer World Cup at the start of December 2010, and gained as much as 14 percent more in subsequent weeks.

But it then gave up much of those gains and essentially moved sideways for the next two years, as investors realized infrastructure building contracts to prepare for the World Cup would not be awarded immediately, and that the tiny state faced big logistical challenges in staging the event. Qatar’s win was more of a surprise than Dubai’s.

However, Henin noted: “People have not sold on the news yet, which is a positive indicator.” And even if a period of profit-taking starts, it is unlikely to push prices down sharply with many investors believing Dubai’s economy and markets are in a long-term upswing.

Shares in Dubai Investment Co, which owns land near the Expo site, rose 3.5 percent and thinly traded Mashreq jumped 8.3 percent.

Emaar Properties, a bellwether for the Dubai market, ended flat at 6.30 dirhams, failing to break decisively above this year’s peaks of AED6.34-AED6.35.

After the recent chasing of small-caps on Expo speculation, blue chips are expected to outperform the market in coming weeks as investors position for year-end dividends, analysts said.

Abu Dhabi’s measure advanced 0.3 percent with small-cap stocks leading gains.

Elsewhere, Cairo’s benchmark index dipped 0.3 percent to its lowest close since Oct. 31. Discontent with the military-led interim government’s slow progress in restoring full civilian rule has started to weigh on sentiment, traders say.