Muscat: The S&P GCC index was up 0.2 per cent in September, increasing the overall gains for the year to 9.8 per cent, according to Kuwait Financial Centre's (Markaz) recently released Monthly Markets Review report.
The rebound in the Saudi and Dubai markets at the end of the month helped the S&P GCC index close on a positive note for September. Oman and Saudi Arabia’s indices were the best performers of the month rising by 2.8 per cent and 0.65 per cent, respectively.
Abu Dhabi was the worst performer, falling by 1.0 per cent. The downgrade in credit ratings of two Dubai-based state-owned companies by S&P Global, in addition to the sluggish real estate sector weighed down on Dubai’s equity markets, raising its losses before staging a recovery at the end of the month.
However, it remains the worst performer during the year, extending its losses to 15.9 per cent. Qatar remained the best performing GCC equity market in year-to-date 2018 despite seeing its general index falling by 0.7 per cent in September.
The Markaz report stated that the Kuwait stock market continues to hog the limelight, as investors are upbeat on its inclusion in the FTSE emerging market index, which officially took effect from September 24. There was a liquidity spike in the market on September 20.
However, the Kuwait stock market was flat during the month and is just about holding on to its yearly gain of 8.8 per cent. Kuwait’s All Share Index, despite its inclusion into the FTSE Emerging Market index, fell by 0.83 per cent during September as the effect of FTSE inclusion was already factored in by investors during the build-up.
The Markaz report also stated that Abu Dhabi Commercial bank and Boubyan Bank were the top performers among Gulf Cooperation Council (GCC) blue chip companies, rising by 12.8 per cent and 6.8 per cent during the month respectively.
Announcement regarding a three-way merger involving Abu Dhabi Commercial Bank to form the fifth largest bank in the GCC enthused investor sentiments, causing the company’s stock to rise and stand out among UAE blue chip companies who posted negative returns for the month of September.
Saudi-based utility company Saudi Electric was the worst performer among blue chip companies, with its stock falling by 11.3 per cent during the month, extending its year-to-date losses to 23.9 per cent.
Brent crude is now trading at US$82.7 per barrel, and is up 23.7 per cent for the year. Supply concerns due to US sanctions on Iran and the increase in demand for oil have been major factors that have pushed up the global oil prices. The strong oil price should provide the needed fiscal relief for GCC countries though many countries still have a break-even oil price above the current spot price.
Abu Dhabi Commercial Bank (ADCB) is exploring the possibility of a merger with its local counterparts, Union National Bank (UNB) and the Sharia-compliant lender Al Hilal Bank. Spicing up the merger and activity environment is a rumour of a possible merger of two of the biggest GCC airlines—Emirates and Etihad. However, there is no confirmation of this deal yet from either of them.
Meanwhile, tit-for-tat imposition of tariffs continued between the United States and China, with the former slapping tariffs on $200 billion worth of Chinese exports into the US, while China retaliated with tariffs on some $60 billion worth of exports into China by the US.
Negotiations are ineffective so far and analysts are hoping that post the US mid-term elections, the posturing can get mellowed.
At the moment, China, along with other emerging markets, is feeling the heat, with the Shanghai index down 14.7 per cent for the year and the emerging market index down by 9.5 per cent, while S&P 500 is up nine per cent for the year. Imposing tariffs in a globalised world is a retrograde step and will only lead to lower global economic growth.