Strong dollar to pressure emerging market stocks

MSCI Emerging Market index ended 0.55% lower on Friday after losing 2.3% last week

Emerging market equities this week are expected to be weighed down by a stronger dollar and rising US treasury yields. On Friday, the MSCI Emerging Market index ended 0.55 per cent lower at 1,137.75 after losing 2.3 per cent of its value last week. The weekly performance compares with 0.5 per cent loss on the MSCI World Equity index.

“Emerging Market equities have been on the backfoot on concerns over strong dollar and trade,” Saleem Khokhar, head of investment management at the First Abu Dhabi Bank Asset Management Group, said.

“The stronger dollar is still there and that remains a concern, and trade issues seem to be calming down. They will remain on the backfoot for a little more time,” he added.

“[A] stronger dollar raises concerns on local currency financing, while trade concerns would limit the ability to increase exports.”

There also seems to be a conciliatory tone on the trade talk front after China said it would “significantly increase purchases” of US goods, an indication of attempts to avert a looming trade war. In the United States, the Dow Jones Industrial Average closed almost steady to 24,720.92, while the S&P 500 lost 6 points, or 0.22 per cent, to close at 2,714.13.

The Dubai index yesterday remained rangebound with Drake and Scull contributing the most to the total traded value.

The Dubai Financial Market General Index closed 0.21 per cent higher at 2,918.74. Traded value stood at Dh208 million.

“UAE markets have been in tight range, and with thin trading. We may see volumes start to increase in late August and September as investors return from summer vacation period,” said Saleem Khokhar, head of investment management at First Abu Dhabi Bank asset management group.

Drake and Scull International closed 1.67 per cent higher at Dh1.22. Traded value was at Dh65 million, contributing to 31 per cent of the total. Gulf Finance House closed 2.08 per cent higher at Dh1.47 while Emaar Properties closed 0.19 per cent higher at Dh5.14. Dubai Financial Market shares witnessed continued buying. DFM shares closed at Dh1.04, up 1.96 per cent.

DIB rights and DIB shares

ICE Brent Crude –1.08% remained flat at Dh1.63 and Dh4.80 respectively. The Abu Dhabi Securities Exchange general index closed 0.13 per cent lower at 4,425.86.

Aldar Properties closed 0.48 per cent higher at Dh2.09 while Union Arab Bank closed 13.85 per cent higher at Dh1.48.

Regional markets

Elsewhere in the region, Saudi Arabia’s Tadawul index closed 0.02 per cent higher at 8,018.06. “We may see increased activity in Saudi as we near the MSCI announcement in June. We have already seen upward momentum in Saudi Arabia. We may see some profit-taking in Saudi Arabia prior to and after the announcement,” Khokhar said.

Dar Alarkan Real Estate Development closed 0.32 per cent higher at 11.38 Saudi riyals, while Nama Chemicals closed 0.72 per cent higher. Saudi Basic Industries Corp closed 0.19 per cent lower at 117.20 riyals. “The petchems as a sector has performed well, along with banks. And there still remains a reasonable value in these sectors,” Khokhar said.

The Qatar exchange index closed 0.39 per cent lower at 8,856.90. In Oman, the Muscat MSM 30 index closed 0.60 per cent lower at 4,590.16.

ICE WTI Crude –0.20%