DUBAI: Middle Eastern stock markets ended a grim year with mixed performances yesterday, but there were signs they could fare better in 2016.
Saudi Arabia, Dubai, Egypt and other regional bourses were caught in an emerging market downturn this year and the Gulf was hit by shrinking oil revenues, while a severe foreign exchange shortage plagued Egypt.
There is likely to be more pain ahead. Gulf governments are starting to cut spending in response to cheap oil, which will hurt economic growth next year, while the reduction in oil revenues is pushing up market interest rates. Investors in Egypt have been disappointed by faltering economic reforms.
Nevertheless, fund managers say there are some reasons for optimism. Expensive equities valuations have come down to more attractive levels; Saudi Arabia’s market is trading at about 13 times this year’s estimated earnings, Egypt at 10 times and Dubai at 8.5 times.
Reforms to state spending, energy subsidies and tax systems in Gulf states may in the long term put them on a sustainable fiscal footing. Saudi Arabia released a reformist state budget for 2016 on Monday.
A survey of 14 leading Middle East fund managers, published yesterday, found 50 percent expecting to raise their regional equity allocations in the next three months, and 14 percent expecting to cut them — the largest bullish balance since February 2014. The Saudi stock index edged up 0.1 percent yesterday, stabilising after two days of falls triggered by austerity measures in the state budget. It fell 17.1 percent throughout this year, in line with a 17.2 percent slide by MSCI’s emerging market index.
Some petrochemical shares, hit by gas feedstock price rises in the budget, stopped falling yesterday. The biggest stock in the sector, Saudi Basic Industries, edged up 0.3 percent.
However, Saudi Kayan lost a further 2.2 percent and PetroRabigh fell 2.0 percent after saying it would restart only gradually its high-olefin fluid catalytic cracker and subordinate units after an extended maintenance period. It estimated the cost of the extra maintenance at SR200m ($53.3m).
Dubai’s index was almost flat, closing with an annual loss of 16.5 percent. Trading volume more than halved from the previous day as foreign investors took year-end holidays.
Abu Dhabi gained 0.7 percent yesterday for a 5.6 percent drop over the year. Telecommunications blue chip Etisalat rose 1.3 percent on the day while Abu Dhabi National Energy climbed 4.4 percent after saying it had obtained its first oil from its new Cladhan field development in Britain’s North Sea.
Egypt’s index rose 0.4 percent to 7,006 points after breaking technical resistance on its December peak on Wednesday, triggering a minor double bottom formed by the November and December lows and pointing up to around 7,400 points. For the year, it lost 21.5 percent.
The Kuwait index edged up 0.1 percent to close at 5,615 points.
The Oman index fell 0.7 percent to 5,406 points, while the Bahrain index rose 0.9 percent to 1,216 points.
