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Five factors to set GCC stock market trend Thursday– Analysis

Five factors to set GCC stock market trend Thursday– Analysis

By: Mahmoud Gamal

Mubasher: The GCC stock markets are likely to be gripped by five factors in Thursday’s trading session, as well as next week, analysts told Mubasher.

They noted that the results of the US Federal Reserve meeting, in addition to Saudi Arabia’s approval of the biggest budget in its history, chief among these factors.

Investors are looking ahead to the Fed decision on the monetary policy late Wednesday. The Fed is expected to raise interest rates for the fourth time this year.

Most of the GCC stock markets closed Tuesday’s trading session in red territory, led by the Dubai Financial Market (DFM), which hit the lowest level since last June due to losses incurred by real estate stocks and lower oil prices.

Interest rate                                                                                                                                                                                     

Investors in the GCC markets are anticipating an increase in interest rates, CEO of MindCraft Consultants Fadi El Ghattis told Mubasher.

The possible hike in interest rates will negatively impact the GCC markets, which are already facing sell-offs by traders amid the decline in oil prices and the plunge in the US stock markets, El Ghattis highlighted.

The Fed is likely to raise interest rate gradually over the next times, which will push investors in the region to temporary selling, he said.

Accordingly, investors would direct liquidity into low-risk banking deposits that have better yields, instead of stock markets, he added.

The real estate sector is the key engine of the economy in some of the GCC countries, and it will be the most affected by the consecutive increase in interest rates, El Ghattis highlighted.

He stressed that the recent drop in global oil prices, particularly Brent crude oil price that fell below $60, will affect the general budgets of some countries in the region that mainly depend on oil.

El Ghattis pointed out that lower oil prices pushed some governments to cut spending on future projects, projecting the Organisation of the Petroleum Exporting Countries (OPEC) and its allies to reach an official agreement early 2019, upon which prices would be reasonable.

Saudi budget

For his part, the economist Mohamed Al-Maimouni said that blue-chip stocks of the Saudi Stock Exchange (Tadawul) are likely to see purchases by retail and institutional investors following the announcement of the largest general budget in the history.

On Tuesday, Saudi King Salman bin Abdulaziz Al Saud said that the 2019 budget is the largest in the kingdom's history.

The Saudi budget includes a total expenditure projected at SAR 1.106 trillion, with revenue expected at SAR 975 billion.

At the technical level, the Tadawul All-Share Index (TASI) has changed its bearish trend to rise and break 7,900 points, Al-Maimouni said.

He noted that the index has surpassed the main resistance at 7,940 points, expecting investors to boost trading in the market on the back of the budget announcement.

FTSE 

As for Boursa Kuwait, current catalysts, including liquidity exceeding billions of US dollars amid the anticipated decision on the second phase of upgrading the market by FTSE Russell, will set the market’s trend, economist Ibrahim Al-Failakawi said.

Al-Failakawi emphasised that the GCC bourses are mostly impacted by the sharp decline in oil prices.

Translated by: Mai Ezz El-Din