Majority of regional stock markets gain in July

Muscat: Majority of stock markets in the Middle East and North Africa (Mena) region gained in July as positive quarterly earnings led to increased investor activity, according to Kuwait Financial Centre report.
Markets in Egypt (13.1 per cent), Qatar (7.3 per cent) and Dubai (5.2 per cent) performed well, while Saudi’s TASI (-3 per cent) and Kuwait weighted (-0.2 per cent) indices lagged behind. The negative performance of the largest GCC market led to flat performance of S&P GCC index, saidthe monthly market research report.
Other indices witnessed slight rise in index values, despite the steepest monthly fall in oil prices in 2016. Egypt HRMS index rose in the last week of the month, as the country’s plan to secure a $12billion loan from the International Monetary Fund (IMF) was close to fruition. The loan is being sought to ease a crippling dollar squeeze, and restore confidence in the economy, and would be the fund’s biggest aid package in a region that has been pummeled by political unrest and oil price fall.
The report added that blue chips drove Qatar’s index surge, with real estate (8.52 per cent), telecoms (7.94 per cent) and banking stocks (7.1 per cent) performing well in July. The recently announced Qatar’s fuel subsidy reform will also help shrink its budget deficit by reducing expenditures; a move that will help investments in private sector.
Saudi index fell due to fall in oil price, and the continued resilience of shale oil, as increasingly efficient United States shale production continues to drive a wedge in Organisation of Petroleum Exporting Countries’ (Opec)strategy of flooding the market with excess crude, said the research note.
Blue chips had a mixed July, with Emaar Properties (UAE) and Ezdan Holdings (Qatar) ending the month at the top, gaining 10 per cent and 9.6 per cent, respectively. National Commercial Bank (Saudi Arabia) and First Gulf Bank (UAE) witnessed a slump, losing 6 per cent and 4.4 per cent, respectively.
Positive second quarter results contributed to improved market performance for most companies in the region, as investors returned to the markets post Ramadan. Dubai's Emaar Properties reported a 8 per cent rise in the second quarter net profit, as strong investor demand led to higher revenue recognition.
Ezdan Holdings half-yearly profit went up 8 per cent, driven by rise in operations. Despite posting a profit of 3.2 per cent in the second quarter, shares of National Commercial Bank declined the most in July, as the bank proposed a lower dividend for the first half of the year, as compared to the previous year. The second quarter profits of First Gulf Bank slipped 10 per cent, meeting analyst estimates, while the merger between FGB and National Bank of Abu Dhabi was confirmed early in July.
Debt issuance
According to IIF, Guff Cooperation Council (GCC) countries are turning to both domestic and foreign debt markets to finance their rising fiscal deficits, and this trend is likely to persist in the short to medium term. Since mid-2014, the drop in oil prices has shifted the large aggregate current account surpluses of GCC countries, accumulated in the past decade, to a deficit of $35billion in 2015, and this is expected to widen to $89billion or 6.5 per centof the GDP in 2016.
The large resident capital outflows in the form of investments, which peaked at $384billion in 2013, have virtually disappeared, and international reserves are being used to fund widening deficits.
Prior to 2016, GCC sovereign debt issuance had been relatively sparse, barring Bahrain, particularly in foreign currency, and usually reserved for benchmarking or for monetary policy purposes. Thus far, in 2016, both Abu Dhabi and Qatar have tapped international markets with sizeable issues.
Real estate
Saudi Arabia has registered a sharp drop of 56.7 per centin the total weekly sales, settling at $0.5billion, the lowest weekly level in a decade. Experts claim this drop in sales was caused by the low demand that followed the implementation of the so-called white land fees regulation, which pushed people who want to buy properties to wait for a real decline in prices.