Mideast Stocks: Most Gulf bourses fall as hawkish Fed hurts mood
Most stock markets in the Gulf ended lower on Thursday as hawkish signals on interest rate hikes by the U.S. Federal Reserve dampened sentiment.
The Fed left rates unchanged on Wednesday, but indicated that they could rise by at least half a percentage point this year. Currencies in most Gulf Cooperation Council countries are pegged to the dollar and any monetary policy change in the U.S. is usually mimicked by Saudi Arabia, the United Arab Emirates and Qatar.
Saudi Arabia's benchmark index fell 0.2%, dragged down by losses in most sectors, with Riyad Bank dropping 1.8% and oil major Saudi Aramco shedding 0.8%. Among the losers, Arab National Bank lost 2.2% and Saudi Dairy and Foodstuff slid 5.5%.
In Qatar, the benchmark fell 0.2%, snapping gains across two consecutive sessions, with heavyweights Commercial Bank PSQC and Qatar International Islamic Bank sliding 2.3% and 1.8%, respectively. The region's largest lender Qatar National Bank lost 0.5%.
In Abu Dhabi, the index declined 0.1%, snapping gains made in the previous session, weighed by a 2.3% drop in ADNOC Gas and a 1.2% decline in blue-chip developer Aldar Properties.
Dubai's benchmark index continued a two-week winning streak and ended 0.5% higher. The index was supported by gains in industry and financial sectors, with tolls operator Salik Company adding 1.3% and Emaar Properties rising 1.8%. The Emirate's largest lender Emirates NBD climbed 1.4%.
"GCC stock markets recorded mixed performances after the change in the tone of the Federal Reserve, pushing traders toward caution", said George Pavel, general manager at Capex.com Middle East.
Outside the Gulf, Egypt's blue-chip index edged up 0.1%, extending a rally across three consecutive sessions, helped by gains in finance and consumer staples sectors. Eastern Co and Credit Agricole Egypt climbed 3.4% and 6.3%, respectively. Commercial International Bank Egypt added 0.6%.
Saudi Central Bank may need to inject liquidity into banks - Capital Economics | Reuters
The Saudi Central Bank, known as SAMA, may need to inject liquidity into the banking sector like it did last year as interbank rates sit at their highest since 2001, London-based Capital Economics said on Thursday.
SAMA did not immediately respond to a request for comment.
"A saving grace in the rise in SAIBOR (Saudi interbank offer rate) to close to 6% is that, compared to the spike in the middle of last year, the spread over the U.S. Libor is far lower at close to 40bp," the research firm said in a note.
"That said, measures of liquidity in the banking sector are still pretty poor – excess liquidity of commercial banks (that is the sum of deposits with SAMA excluding statutory deposits, plus SAMA bills) stands at just over 2% of total assets."
The note added that SAMA may have to inject liquidity into the banking sector as it did last June in order to support credit growth.
Private sector credit grew at 9.7% year-on-year in April, its slowest pace since February 2020, Capital Economics said, as lower oil prices provide a less supportive backdrop for credit growth "and could weigh on the non-oil economy which, as we have argued, will need to do the heavy lifting for GDP growth this year."
Boosting the non-oil economy is at the heart of Saudi Arabia's ambitious economic agenda that aims to wean the kingdom off oil. Under the plan, Vision 2030, it has invested billions to diversify into sectors such as tourism, launch massive infrastructure projects, and develop the financial and private sectors.
Abu Dhabi's G42 and Israeli firm Viola partner up in new tech venture | Reuters
Abu Dhabi's artificial intelligence firm G42 and Israeli technology investment company Viola Group, which manages $5 billion in assets, on Thursday announced Global Valley, a joint venture to set up a new platform to meet demand for high-skilled tech talent.
Based in the UAE capital, Global Valley will employ specialised tech-focused workers from around the world providing a variety of services, as well as help develop Abu Dhabi's local tech sector, a statement from the Abu Dhabi Investment Office, which provided support for the project, said.
No figure for the value of the investments by any of the involved parties was provided in the statement.
ADIO is a government vehicle tasked with expanding private sector investment into the emirate and helping diversify its economy.
"Tech in our minds is going to be a functional infrastructure-related industry for us to build everything, from our healthcare sector, financial services, to tourism and so forth," said Abdulla Abdul Aziz AlShamsi, director general of ADIO.
"Creating this cluster in Abu Dhabi is fundamental to what the future economy will require. We are looking to diversify Abu Dhabi's economy, we want and are developing further platforms for growth. We want to give our people opportunities in every industry," Shamsi told Reuters.
Trade and investment ties between the UAE and Israel have grown since the signing of the Abraham Accords agreement in 2020, establishing diplomatic relations.
UAE's ADCB, Emirates NBD Fill Financing Void Left by Global Banks in Turkey - Bloomberg
United Arab Emirates-based banks are increasing loans to their Turkish counterparts, filling a gap left by Western lenders that have retreated amid concerns over the country’s increasingly restrictive regulatory environment under President Recep Tayyip Erdogan.
Two of the Gulf state’s biggest lenders, Abu Dhabi Commercial Bank PJSC and Emirates NBD Bank PJSC, arranged 61% of all syndicated loans, which involve multiple lenders and one borrower, to Turkish banks in the first half of the year, compared with about 15% during the same period a year earlier, according to data compiled by Bloomberg.
By comparison, the likes of ING Groep BV, Deutsche Bank AG, Citigroup Inc. and Standard Chartered Bank Plc — which have lent to Turkish banks every year since 2021 — arranged 18% of loans, down from 33% a year ago.
Many international banks turned increasingly cautious on Turkey in the run-up to crucial elections in May that saw Erdogan reelected for another five-year term. Although the president is now setting the stage for a change in economic course, he has long championed an unorthodox economic policy based on ultra-low interest rates, which has come at a high cost in the form of depleted foreign-currency reserves, an inflationary spike, and an exodus of foreign capital.
Gulf Central Banks Pause Rate Hikes in Tandem With Fed - Bloomberg
Central banks in the Gulf including Qatar and the United Arab Emirates followed the Federal Reserve’s decision to hold interest rates in order to protect their currencies’ peg against the US dollar.
Policymakers in the region generally have little room to maneuver due to the greenback-pegging policy and tend to move in lockstep with the US central bank decisions. The Fed signaled it would likely resume tightening to cool inflation, projecting more increases than economists and investors expected.
Though, cost pressures in the Gulf have been relatively muted in comparison to the US.
- Qatar said it would keep its repo rate unchanged at 5.75%, its lending rate at 6% and its deposit rate at 5.5%
- The UAE maintained its base rate applicable to the overnight deposit facility at 5.15%
- Central Bank of Oman kept its repo rate unchanged at 5.75%. Its key policy rate remained at the range of 5.00% and 5.25%
Saudi, Dubai bourses rise in early trade, Qatar Falls | Reuters
Stock markets in Dubai and Saudi rose on Thursday on rising oil prices as data showed a jump in refinery runs in China, although other major markets were subdued amid U.S. Federal Reserve's hawkish signals on interest rate hikes.
Crude prices — a key catalyst for the Gulf's financial markets — edged up on Thursday with Brent crude at $73.39 a barrel by 0750 GMT.
Oil refinery throughput in China, the world's top crude importer in May rose 15.4% from a year earlier, data showed on Thursday, hitting its second highest total on record.
Saudi Arabia's benchmark stock index (.TASI) rose 0.2%, lifted by gains in finance, health care and consumer staples sectors with Dr Sulaiman Al-Habib (4013.SE) Medical Services adding 1.6% and Almarai Company (2280.SE) surging 7.3%.
Dubai's benchmark stock index (.DFMGI) added 0.2%, supported by gains in most sectors, with Emaar Development (EMAARDEV.DU) rising 2% and the Gulf Navigation (GNAV.DU) adding 2.6%.
The emirate's largest lender Emirates NBD (ENBD.DU) gained 0.7%.
In Qatar, the benchmark index (.QSI) fell 0.5%, with index heavyweight Qatar Islamic Bank (QISB.QA) dropping 0.8% and region's largest lender Qatar National Bank (QNBK.QA) sliding 1.7%.
In Abu Dhabi, the benchmark stock index (.FTFADGI) lost 0.2%, weighed down by a 1.2% loss in Multiply Group (MULTIPLY.AD) and 0.6% drop in blue-chip developer Aldar Properties(ALDAR.AD).
The United Arab Emirates' biggest lender, First Abu Dhabi Bank (FAB.AD) slipped 0.8%.
The Federal Reserve left interest rates unchanged on Wednesday but signaled that borrowing costs may still need to rise by as much as half of a percentage point by the end of this year.
Currencies in most Gulf Cooperation Council countries are pegged to the dollar and any monetary policy change in the United States is usually mimicked by Saudi Arabia, the United Arab Emirates and Qatar.
