GCC stock markets continued their negative performance for the third week in a row and saw a new wave of declines as oil prices dropped to new five-year low levels. However, on the last trading day of the week all GCC markets were seen higher putting a halt to the strong drop witnessed in the last few weeks with increased trading activity. The markets were supported by stronger oil and U.S. equity markets as well as positive news from Saudi Arabia.
On Wednesday, Saudi Finance Minister Ibrahim Alassaf said his government would continue spending heavily on development projects and social benefits in its 2015 budget, expected to be announced next Monday, despite cheaper oil. Kuwait, UAE and Qatari officials have made similar statements in recent days, addressing the main fear of Gulf investors. This piece of confirmation raised investor’s sentiment and caused a notable increase in buying activities especially at the current and much lower prices. Saudi Arabia equities saw a strong reversal to the upside in response to the finance minister positive statement, and were seen higher on the last two sessions of the week.
Meanwhile, and with the current flip of events, it is expected that the big declines have now taken place and stocks are likely to stabilize for a while. And if oil prices continue to stay low or see additional falls, equity markets will not be strongly affected as they were previously. The economies of many oil exporting countries are stronger, in addition to that, government spending will continue as planned. Nonetheless, equity prices are currently undervalued and present great opportunity to build positions before the year ends and profit announcements and dividends start to be revealed.
In UAE, both of the markets wiped all their 2014 gains at the beginning of the week, for the first time since the beginning of 2014. However they succeeded to reverse back to positive on the last trading session of the week. On Sunday, ADX market said it would suspend trading for five minutes in stocks that fell 5.0%, becoming the first regulator in the region to take such a step in response to the downtrend. On Thursday, many traded stocks in both of the UAE markets succeeded to surge by their daily 15% limits, including heavyweight developer Emaar and Aldar Properties in DFM and ADX markets, respectively. During the same session, DFM Index managed to record its biggest daily gain since the index was launched in 2004 when it rose by 12.98% and closed at 3,426.7 points.
Kuwait Stock Exchange (KSE) continued its retreat for the fifth week with its weighted indices recording their steepest weekly decline in over five years despite the reversal to the upside it saw on Thursday. Meanwhile, Qatar Exchange was closed on Thursday for the national day holiday and was expected to react positively once opened next Sunday.
Combined Market Capitalization of the seven GCC stock markets decreased by 1.84% as on 18 December, to USD998.29bln in comparison to USD1,017.03bln recorded on 11 December 2014.