UAE spurs GCC market rally

Most regional markets saw a notable rebound in the second quarter with shares gaining from stabilising oil prices and a relatively calmer geopolitical climate.

Dubai - Led by a strong performance by the UAE market, most stock markets in the GCC rallied in the second quarter following a strong market correction that was triggered by the drop in oil prices, National Bank of Kuwait, or NBK, said.
Most regional markets saw a notable rebound in the second quarter with shares gaining from stabilising oil prices and a relatively calmer geopolitical climate.
The MSCI GCC total return index was up 4.6 per cent. GCC markets' capitalisation stood at $1.1 trillion, having added $88 billion in the second quarter as market liquidity dropped 22 per cent, with the daily traded value averaging $2.2 billion.
"In the GCC, the UAE markets outperformed, with the Dubai Financial Market, or DFM, up 16 per cent and the Abu Dhabi Securities Market up six per cent in the quarter. The DFM was the hardest hit when oil prices started to drop late last year. So, when oil prices finally stabilised late January, the market seemed due for a rally," NBK said.
In the first quarter, Saudi Arabia was the only GCC market that rallied, with the main catalyst being the decision to open up the market to foreign investors by the middle of this year." Ironically, when the decision went into effect mid-June, the market seemed to have already priced it in and the Tadawul All-Share Index dropped for a few consecutive sessions afterwards, NBK said.
The Qatari and Omani markets also made gains in the second quarter, up four and three per cent respectively. The Kuwaiti and Bahraini markets were the only two GCC markets to lose ground in the quarter.
The Kuwait Stock Exchange value-weighted index was down 0.4 per cent and continued to lack a catalyst that would turn things around. The tragic June suicide bombing had a somewhat muted effect on prices, though it surely affected market sentiment.
The bank's analysts said in its analysis that in the coming months, regional markets are likely to continue to be focused on oil price developments. "Oil prices remain an important factor, especially for the markets/economies with weaker fiscal positions such as Dubai, Oman and Bahrain. The other markets with larger fiscal buffers are likely to see more limited impact of large changes in oil prices. In those markets, such as Saudi Arabia, Qatar, Abu Dhabi and Kuwait, the economies appear more resilient in the current low oil price environment as governments renew commitments to boost or maintain capital spending and are determined to move forward on their development plans."
Geopolitical and security developments will also be scrutinised in the coming months. Developments in Yemen will be in the forefront and the Iranian nuclear programme negotiations are also likely to impact markets in the coming months.
"Any terror attacks (Egypt, Tunisia, Kuwait, etc.) and markets will have to factor in the added risk. Internationally, a stronger dollar, fear of Greek exit from the euro and the timing of the first US interest rate hike later in the year are all market moving factors," it said.
- issacjohn@khaleejtimes.com