GCC markets have turned positive as Opec recently agreed for production cuts, Kuwait Financial Centre (Markaz) has said in a report.
Markaz report said that Mena bourses had a positive month in November, with Egypt’s HRMS index rising 36.6%, followed by Saudi’s TASI index (16.4%).
The Qatar index was the only one in the Mena region that ended the month in red, closing November down 3.7%. Kuwait weighted and price indices had a positive month, climbing 3.7% and 2.8%, respectively.
International Monetary Fund approved for a three-year, $12bn bailout programme for Egypt aimed at reviving the struggling economy, bringing down public debt and controlling inflation. The IMF immediately disbursed an initial loan tranche of $2.75bn to Egypt’s central bank, and the remainder will be phased out over the next three years and are subject to five reviews on required reforms. The injection of new funds increased the Central Bank of Egypt’s foreign reserves to $23.3bn.
Stocks surged in November, as Egypt’s central bank allowed lenders to sell dollars to clients seeking to repatriate profits, further easing currency restrictions in an effort to bring back foreign investors and revive the economy.
The Saudi index also rose in the month to erase the year’s losses, as the $17.5bn international bond issue in late October eased fears about its ability to cope with an era of cheap oil, and helped it begin making delayed payments to settle its debts to private companies. The S&P GCC index closed the month at 95 points, 7.9 per cent higher than previous month’s close.
The report stated that investor sentiment in Qatar was dampened by the country’s Energy Minister’s assessment that the global LNG market is entering a period of uncertainty as the current low price environment deters investment in new supply projects, which could eventually lead to price spikes in the future.
Qatar, currently the world’s largest exporter of LNG, is expected to lose its top position to Australia next year when new production from the latter comes on line. In terms of valuation, P/E of Morocco (18.2x), Kuwait (16.8x), and Jordan (14.2x) markets were the premium markets in the Mena region, while the markets of Egypt (8.5x), Dubai (8.6x), and Bahrain (9.3x) were the discount markets.
Blue chips also had a positive month, with Saudi Telecom and Kingdom Holding (Saudi Arabia) ending the month at the top of the pile, gaining 25% and 15.4, respectively.
DP World (UAE) and QNB lagged behind the rest of the blue chips, falling by 13.5% and 6.9%.
Brent crude fell to $44.43 a barrel in November, before rising 13.6% and closing the month at $50.47 per barrel, as Opec clinched the deal to reduce output on the last day of the month. Opec representatives reached a landmark deal to reduce oil output, propelling crude prices by almost 9% on the last day of the month, after a lot of market uncertainty about the ability of the group to strike an agreement.
The decision would cut production by 1.2mn barrels a day from 33.6mn barrels, and said it expects producers from outside the group, including Russia, to join with additional cuts totalling 600,000 barrels a day. Russia alone will cut 300,000 barrels per day.
The proposed Opec cuts were deeper than many analysts had expected, amounting to about 1% of global production, Markaz noted. The output cuts are expected to shrink the supply glut that has been fed in part by the US shale boom, and has depressed oil prices for more than two years.
On the other hand, the pact benefits the shale producers, giving them an incentive to ramp up production, which could potentially bring a halt to any oil-market rally. This is worrisome for Gulf oil exporters, Markaz said as the President-elect Trump had proposed to maximise domestic production and accelerate exploration programmes.

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