Gulf mar­kets ab­sorb shock Trump vic­tory

MIDEAST STOCK MAR­KETS

Kuwait Times - - BUSINESS -

Gulf stock mar­kets de­pen­dent on for­eign funds, such as Dubai and Qatar fell yes­ter­day as the re­gion ab­sorbed the shock of Don­ald Trump’s US elec­tion win and pre­pared for more volatile trad­ing ahead. Trump, feared by mar­kets be­cause of his views on trade, im­mi­gra­tion and tax­a­tion, may en­act poli­cies that could af­fect the oil price, the strength of the dol­lar and cap­i­tal flows, said Mon­ica Ma­lik, chief econ­o­mist of Abu Dhabi Com­mer­cial Bank.

“More un­cer­tainty could place down­side pres­sure on oil prices and cap­i­tal flows. Trump has also sup­ported in­creas­ing hy­dro­car­bon pro­duc­tion to sup­port jobs growth, which could de­lay the rebalancing of the oil price,” she said. Some an­a­lysts con­sider that the im­pact on the re­gion may be less se­vere than on other emerg­ing mar­kets since the Gulf eco­nomic bloc does not have di­rect trade pacts with the United States.

“The Gulf re­gion as a whole does not trade much with the US di­rectly, and there are no bind­ing trade ties, so even Trump’s pro­tec­tion­ist poli­cies will have lit­tle im­pact in terms of trade,” said Mo­hamed Shabbir, a Dubai-based in­de­pen­dent in­vest­ment ad­vi­sor.

The ex­pec­ta­tion that in­ter­est rates will re­main an­chored at cur­rent low lev­els may ben­e­fit those Gulf economies pegged to the dol­lar and for gov­ern­ments and cor­po­rates plan­ning to is­sue bonds.

“One up­side could be that in­ter­est rates may be lower for longer, with the prob­a­bil­ity of a Fed rate hike in De­cem­ber now fall­ing,” added Ma­lik. Nev­er­the­less, pro­tec­tion­ist trade rhetoric from Trump could lead to a drop in cap­i­tal in­flows as the Gulf’s trade part­ners in Asia are likely to suf­fer from a de­cline in trade with the United States.

“One of the big­gest wor­ries, and the one that will im­pact the re­gion most, is his op­po­si­tion to the Trans-Pa­cific Part­ner­ship, this is likely to neg­a­tively im­pact emerg­ing economies, which the Gulf largely trades with,” Hussein alSayed, FXTM’s chief mar­ket strate­gist for the Gulf and Mid­dle East.

Other economists voiced sim­i­lar con­cerns. “The prospect of pro­tec­tion­ism and lower global growth will hit eq­uity mar­kets and risk as­sets world­wide. Emerg­ing mar­kets are par­tic­u­larly vul­ner­a­ble given their de­pen­dence on global trade,” said Keith Wade, chief econ­o­mist and strate­gist at Lon­don-based Schroders.

“We still don’t know what his for­eign pol­icy will en­tail, an­other risk which in­vestors will be pric­ing into the mar­kets.”

Yes­ter­day stock mar­kets in the re­gion ini­tially plunged but closed well off their lows as in­vestors ab­sorbed the ini­tial shock to fo­cus on re­gional fun­da­men­tals. “Global mar­kets, the Gulf and Egypt in­cluded, were pric­ing in a Clin­ton vic­tory over the last cou­ple of ses­sions, and in­stead they got Trump in the White House, but in­vestors in the re­gion then turned their fo­cus on do­mes­tic fac­tors es­pe­cially in Saudi Ara­bia and Egypt,” said Shabbir.

In Cairo, the in­dex of the 30 most valu­able shares ex­tended gains for a fourth straight ses­sion and closed up 1.3 per­cent at 10,226 points, a fresh 8 year high. Trad­ing vol­umes sur­passed Tues­day’s ses­sion. Global Tele­com Hold­ing gained 3.3 per­cent and in­vest­ment firm EFG Her­mes soared 6.3 per­cent. “The pos­i­tive re­ac­tion fol­low­ing the cur­rency float and with the IMF $12 bil­lion loan inch­ing closer in­vestors shrugged off the global neg­a­tive sen­ti­ment,” said Shabbir.

It is now up 20 per­cent since the Egyp­tian pound was floated to­day. The broader in­dex out­per­formed the blue chip bench­mark for a sec­ond day, gain­ing 3.2 per­cent. Riyadh’s in­dex, which is usu­ally traded by lo­cal in­vestors, closed up 0.8 per­cent to 6,380 points, af­ter it fell as much as 3 per­cent in morn­ing trade. Do­mes­tic-fo­cused shares were the top gain­ers, with mo­bile op­er­a­tor Zain KSA jump­ing 5.9 per­cent.

But Dubai’s in­dex, which is more vul­ner­a­ble to for­eign fund flows, lost 0.8 per­cent to 3,279 points, al­though it closed 64 points above its ses­sion low. Emaar Prop­er­ties lost 0.3 per­cent, but its unit Emaar Malls Group rose 0.8 per­cent. Qatar’s main in­dex, an­other Gulf mar­ket sen­si­tive to for­eign fund flow, closed down 0.1 per­cent as a lit­tle over half of the listed shares de­clined. Voda­fone Qatar lost 1.6 per­cent, but com­modi­ties pro­ducer In­dus­tries Qatar re­cov­ered to add 1.8 per­cent.— Reuters

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