By: Mahmoud Gamal
Dubai – Mubasher: The recent historic gains for oil prices are expected to support stocks across the GCC, particularly as the period for disclosing third-quarter financial results approaches, analysts told Mubasher.
Oil prices rose to their highest levels in over two-and-a-half months by the end of Friday’s trading session, amid fears of an undersupply, which resulted in weekly and monthly gains.
Moreover, several GCC bourses ended the week on a positive note, led by the Dubai Financial Market (DFM), which grew 2.22% backed by Emirates NBD’s stock.
The recent improvement in several global and emerging markets such as China, Russia, and South Korea, will have a positive impact on foreign investors, particularly those investing in Dubai, whose index has dropped to low and attractive levels, commented Ali Al Enazi, financial analyst at Global Financial Consulting & Training.
Since May, emerging markets have repeatedly suffered strong selling by foreign investors.
Current oil prices as well as the decision by the Organization of Petroleum Exporting Countries (OPEC) to maintain supply and not increase its output despite pressure from the US will help GCC bourses extend their gains, the analyst told Mubasher.
By the end of Friday’s trading session, Brent crude had increased, closing above $82 per barrel. However, concerns of a decline in global demand for oil continue to be rampant.
Rising oil prices will prompt higher government spending, which, in turn, will have a positive impact on projects, where regional listed companies are working, Al Enazi went on.
Moreover, the approaching disclosure period for third-quarter financial results, amid forecasts of strong operating profits by companies will boost GCC markets, particularly those listed in Saudi Arabia and Boursa Kuwait, the analyst highlighted.
Al Enazi advised investors to purchase stocks with strong operating performance, especially those in the banking sector, which is considered a major player in the GCC’s growth and development plans.
Turning to the Saudi Stock Exchange (Tadawul), analyst Mohamed Al Maymoony forecast that the Saudi bourse would continue its sideways trend and target levels between 7,800 and 7,900 points.
He told Mubasher that these forecasts coincide with the kingdom’s Ministry of Finance’s announcement of a pre-budget statement for 2019, as well as the approach of quarterly and nine-month results.
The Saudi pre-budget statement for 2019 is issued for the first time this year.
The benchmark Tadawul All-Share Index (TASI) has succeeded in recording several gains last week on the back of positive projections for financial results, the analyst noted, adding that liquidity had also increased.
This high turnover is likely to help the market hold at around 7,850 points, exit the falling trend, and surpass 7,900 points, Al Maymoony added.
Rising oil prices will prompt GCC investors to take up positions in the petrochemicals sector, commented Iyad Aref, CEO of NamaaZone.
Oil’s strong gains will be reflected in companies’ fourth quarter results and those for the first quarter of 2019, the analyst indicated, adding that oil prices will significantly bolster petrochemical companies’ operating profits.
As for TASI, Aref forecast that it would see a temporary recovery amid anticipation for Q3-18 results.
As for its recent performance, the analyst said that the Saudi bourse’s benchmark index had reached a high of 8,500 but suffered short-term profit-taking afterwards, taking it below 8,000 points.
If TASI resumes trading above 8,200 points, this will give investors a boost of confidence, prompting them to buy and the index to rise above 8,500 points, he added.
As for the UAE’s bourses, Aref said that indices closed in the green last week, particularly the DFM which grew 61 points and closed at 2,825 points.
Aref forecast that UAE bourses would begin to see some positivity, with the DFM’s general index passing 2,900 points and regaining the level of 3,200 points in the coming period on the back of higher liquidity.
Translated by: Nada Adel Sobhi