Kuwait Times - - BUSINESS - DUBAI, EGYPT

The threat of a US in­ter­est rate hike in De­cem­ber dragged down ma­jor Mid­dle East stock mar­kets yes­ter­day, il­lus­trat­ing how frag­ile in­vestor sen­ti­ment in the re­gion has be­come in the face of low oil prices.

Short-term US bond yields rose to their high­est in five years on Fri­day af­ter very strong US jobs data for Oc­to­ber boosted the like­li­hood that the Fed will raise rates be­fore year’s end. Money mar­ket rates have al­ready been ris­ing in the Gulf as liq­uid­ity shrinks be­cause of lower oil rev­enues. Higher US rates could in­ten­sify the si­mul­ta­ne­ous fis­cal and mone­tary squeeze in the re­gion.

The Saudi stock in­dex dropped as much as 1.9 per­cent dur­ing the day but closed 0.6 per­cent lower at 6,923 points, hold­ing tech­ni­cal sup­port at its Au­gust low of 6,921 points. It was the sec­ond test of that sup­port since last week. Real es­tate de­vel­oper Dar Al Arkan lost 0.8 per­cent. Saudi Print­ing and Pack­ag­ing, which had be­gun tum­bling on Thurs­day as a bub­ble in the stock burst, plunged a fur­ther 10 per­cent.

Oil prices fell as much as 2 per­cent on Fri­day, with Brent end­ing be­low $48 a bar­rel. That hit petro­chem­i­cal pro­duc­ers such as Saudi Ba­sic In­dus­tries, which sank 1.5 per­cent.

The US in­ter­est rate threat had the big­gest im­pact on mar­kets in the United Arab Emi­rates through real es­tate de­vel­op­ers. The dirham’s peg to the US dol­lar could force the UAE cen­tral bank to raise rates, while ap­pre­ci­a­tion of the dirham along­side the dol­lar may de­ter for­eign buy­ing of Dubai prop­erty by in­flat­ing prices.

The Dubai stock in­dex sank 3.0 per­cent as blue chip Emaar Prop­er­ties slipped 4.7 per­cent and Deyaar Prop­er­ties lost 5.6 per­cent. Air Ara­bia fell 5.2 per­cent af­ter re­port­ing a 6 per­cent drop in third-quar­ter net profit to 235 mil­lion dirhams ($64 mil­lion). An­a­lysts had on av­er­age pre­dicted 300 mil­lion dirhams. How­ever, de­liv­ery firm Aramex gained 2.2 per­cent. It has been on an up­trend since Oct. 28, when its chief ex­ec­u­tive told Reuters that the com­pany had sev­eral ac­qui­si­tions in the pipe­line and was ex­pect­ing to close deals val­ued in range of $150 mil­lion in the next two quar­ters.

Abu Dhabi’s in­dex lost 1.6 per­cent as Al­dar Prop­er­ties, the most heav­ily traded stock, dropped 5.8 per­cent. Qatar’s in­dex fell 1.9 per­cent with petro­chem­i­cal pro­ducer In­dus­tries Qatar los­ing 2.9 per­cent and drilling rig provider Gulf In­ter­na­tional Ser­vices slip­ping 4.3 per­cent.

Egypt’s stock in­dex sank 2.6 per­cent. With a big ex­ter­nal deficit and low for­eign ex­change re­serves, Egypt is illplaced to with­stand higher US in­ter­est rates, which could has­ten a cur­rency de­val­u­a­tion that many think is in­evitable. Egypt’s two largest state banks have launched sav­ings cer­tifi­cates for Egyp­tian pounds with an in­ter­est rate of 12.5 per­cent to sup­port the cur­rency, lo­cal me­dia and bankers said yes­ter­day, in­creas­ing the like­li­hood of an Egyp­tian cen­tral bank rate hike next month.

Prop­erty de­vel­oper Palm Hills dropped 4.9 per­cent, giv­ing up al­most all of its 5.2 per­cent jump on Thurs­day, when it re­ported a bet­ter-than-ex­pected third-quar­ter net profit of 182.02 mil­lion Egyp­tian pounds ($22.7 mil­lion) af­ter mi­nor­ity in­ter­ests ver­sus 129.70 mil­lion pounds a year ago. —Reuters

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