Reuters/Dubai
Most major stock markets in the Middle East rebounded yesterday, led by bourses in Dubai and Saudi Arabia, as global equities stabilised and several companies in the region reported strong quarterly earnings.
On Sunday, some regional bourses had posted their biggest losses in years as global markets’ decline at the end of last week, and sliding oil prices, triggered broad profit-taking. The main indexes in Dubai and Saudi Arabia plunged6.5%.
But although Dubai tumbled as much as 2.7% early yesterday, it closed 1.9% up on relatively strong volume as most stocks gained. Shares in asset management and investment banking firm Shuaa Capital surged 5.9% after it reported a six-fold increase in third-quarter profit.
Abu Dhabi’s index rose 1.0% as blue chip First Gulf Bank added 1.4%.
Although Gulf economies rely heavily on oil earnings, cash-flush governments have large reserves that they could use to sustain spending during a long period of low oil prices, so cheaper oil is unlikely to cripple the region.
Also, most governments have low debt and are running big external surpluses, while the markets are not heavily dependent on foreign money. So Gulf stock prices may fare better than most during any global downturn.
Emad Mostaque, strategist at Eclectic Strategy in London, said Dubai might be the most vulnerable Gulf market after its surge over the past two years left some stocks richly valued, while Qatar might be least vulnerable given the wealthy government’s record of supporting the market.
“Qatar looks more like a bond than a stock market given the significant level of government support that the local stocks enjoy,” he wrote in a report.
But Mostaque said overall, Gulf markets were likely to perform fairly well unless there was another global systemic crisis.
Saudi Arabia’s main index was the region’s best performer yesterday, jumping 2.3%. Heavyweights Al Rajhi Bank and Saudi Basic Industries (SABIC) were the main supports, up 2.4 and 2.2% respectively.
Almarai, the Gulf’s largest dairy company, surged 8.1%. The company reported a 13.4% increase in third-quarter net profit on Sunday, beating analysts’ estimates, but dropped 4.4% on that day in the indiscriminate, broad sell-off.
Brent crude oil fell below $88 a barrel yesterday to its lowest level in almost four years. Cheaper oil in the long run could put pressure on the competitiveness of Gulf petrochemical firms, eroding the advantage they enjoy from inexpensive natural gas feedstock.
But so far the stock market has been focusing more on demand than supply factors, analysts said.
Chinese trade numbers, which showed exports grew 15.4% year-on-year in September and imports rose 7%,both ahead of market expectations, eased fears of slowdown in the world’s second-largest economy yesterday.
On the other hand, some companies such as energy-hungry metals and construction materials producers could benefit from cheaper oil.
Egypt’s bourse remained in a profit-taking mood and fell 0.5%. Sitting on 34% gains year-to-date, the Cairo bourse is the second-best performer in the region after Dubai, which is up 40%.
Elsewhere in the Gulf, Kuwait’s index slipped 0.2% to 7,557 points; Oman’s index fell 1.6% to 7,199 points, while Bahrain’s index slipped 0.1% to 1,465 points.
