Shares bounce as bulls fight back

Some relief for stocks after a brutal October

Stock markets bounced yesterday, bringing some relief after a brutal October in which equities have suffered one of their worst drops in a decade and spooked investors.

Sino-US trade tensions, concerns about the global economy and higher US interest rates and fears that corporate earnings’ growth is peaking have combined to shake financial markets this month

Data overnight showing that China’s factory growth slowed to its lowest in two years. That followed disappointing Eurozone growth data published on Tuesday.

Investors rushed into the dollar, sending it to a 16-month high while the offshore Chinese yuan languished at a 22-month low.

A batch of positive earnings set a firmer tone for European stocks yesterday, though pan-European indexes are still headed for their weakest month since August 2015. Wall Street was indicated higher at the open, with the S&P 500 e-mini futures 0.7 per cent ahead. The MSCI world equity index, which tracks shares in 47 countries, rose 0.6 per cent but remains down 8.2 per cent in October.

Middle East funds have become more wary, but not outright bearish towards Saudi Arabia’s stock market because of concern over the fallout from the killing of Jamal Khashoggi, a monthly Reuters poll showed yesterday.

Foreign investors, including those from other Gulf states, were net sellers of Saudi equities for most of last month, partly because of fear that Khashoggi’s death could damage Saudi ties with the West and conceivably lead to economic sanctions.

Gulf investors sold a net $147 million (Dh540.66 million) of Saudi stocks last week, after net sales of $98 million in the previous week and $28 million in the week before that, according to exchange data. But the poll of 13 leading Middle Eastern fund managers, conducted over the past week, suggested most funds do not intend to continue selling.

Twenty-three per cent expect to raise their allocations to Saudi equities in the next three months and the same proportion to reduce them. In last month’s poll, 38 per cent anticipated increasing Saudi allocations and none foresaw cutting them.

Many managers are still looking ahead to estimated inflows into Saudi Arabia of about $15 billion of “passive” funds next year when Riyadh’s market joins emerging market indices. Because this money is closely linked to the indices, it is unlikely to be affected by geopolitics.

A big investment conference in Riyadh last week was boycotted by more than two dozen top western executives and officials, but plenty of lower-level executives were there and business contacts continued. Also, stronger Saudi state finances, partly due to a rebound of oil prices, are expected to help economic growth accelerate next year.

“The Middle East and North Africa region’s economic outlook is improving, with the International Monetary Fund raising the growth outlook as higher oil prices start to trickle through to increased fiscal spending,” analysts at Arqaam Capital said in a report this week.

The Middle East and North Africa region’s economic outlook is improving, with the International Monetary Fund raising the growth outlook as higher oil prices start to trickle through to increased fiscal spending.” Analysts at Arqaam Capital