Text size:

  • Small
  • Normal
  • Large
Since March 14, the Dow Jones Industrial Average is down 3.2 per cent, the Euro Stoxx 50 Index is down 9.22 per cent and Japan's Nikkei is down 6.17 per cent. Reuters
Since March 14, the Dow Jones Industrial Average is down 3.2 per cent, the Euro Stoxx 50 Index is down 9.22 per cent and Japan's Nikkei is down 6.17 per cent. Reuters

Global ills threaten Middle East equities

Fund managers across the region are worried that impressive gains enjoyed by markets in the Middle East so far this year can be quickly reversed if global volatility persists.

Fund managers across the region are worried that impressive gains enjoyed by markets in the Middle East so far this year can be quickly reversed if global volatility persists.

Major stock markets in Europe, Asia and the United States have closed lower more often than they have closed higher in recent weeks on renewed fears about the euro-zone sovereign-debt crisis, ongoing concerns about a hard landing in China and mixed recovery signals from the US.

Since March 14, the Dow Jones Industrial Average is down 3.2 per cent, the Euro Stoxx 50 Index is down 9.22 per cent and Japan's Nikkei is down 6.17 per cent.

Stocks in the UAE and Saudi Arabia have the most to lose from the global uncertainty, because they have benefited from the biggest gains so far this year, local fund managers and analysts have said.

"In Saudi Arabia and the UAE, the correction may be sharper because they have gained more than 20 per cent this year. Other markets may hold on [to their gains]," said Kanaga Sundar, the head of research at Gulf Baader Capital Markets in Oman.

Optimism about the global recovery and demand has helped to rally global equities since the start of the year. In the US, the Dow Jones Industrial Average is up 4.81 per cent for the year so far.

The Euro Stoxx 50 Index is up 1.94 per cent. In Asia the Nikkei has gained 6.57 per cent, with the Hang Seng up 10.33 per cent.

But fears about a resurgence of debt trouble in Spain and concerns that the US recovery might be slowing have arrested that run in recent weeks.

Regional bourses have outstripped the performance of many of the more developed markets. The Dubai Financial Market General Index is up 23.54 per cent since January, the Abu Dhabi Securities Exchange General Index is up 5.4 per cent in the period, and the Saudi Tadawul All-Share Index has gained 18 per cent.

Local factors such as renewed confidence in the UAE property market have helped to boost gains.

Aabar Investments increasing its stake in Arabtec, a builder in Dubai, has sent Arabtec's stock up 116.98 per cent this year. Aabar is an investment vehicle owned by the Abu Dhabi Government.

A possible merger between the Abu Dhabi developers Aldar Properties and Sorouh Real Estate has pushed their stocks higher.

But there is concern that a prolonged reversal in the global trend could strip the gains made by regional markets.

"So far, the impact has been somewhat muted," said Haissam Arabi, the chief executive at Gulfmena Investments in Dubai.

A persistence of global market weaknesswould harm sentiment, he said.

"We're still confident we've entered a new cycle, but that could be impacted by heightened fear," Mr Arabi said.

Hisham Tuffaha, a fund manager at Bakheet Investment Group in Saudi Arabia, said bad news from outside the region had already been priced in on the Tadawul.

The Egyptian Exchange leads a cadre of strongly performing markets in the Middle East and North Africa, up 28.42 per cent this year.

However, Wafik Dawood, the head of institutional sales at Mega Investment Securities in Egypt, said Gulf economies and markets were more vulnerable to global influences than were post-revolution countries such as Egypt.

"In Egypt particularly, investors are already concerned by the political scene, they are not worried about what's happening in the global backdrop," he said.

Egypt continues to endure economic uncertainty as a result of persistent volatility in its domestic politics. The political divisions have extended to the question of whether the country should accept an IMF loan to shore up its weak finances.

lmiller@thenational.ae

twitter: Follow our breaking business news and retweet to your followers. Follow us

Back to the top

More articles


Editor's Picks

 The Greens, villas: Q1 no change. 3BR - Dh210-250,000. 4BR - Dh210-260,000. 5BR - Dh220-300,000. Q1 2013-Q1 2014 5% rise. Pawan Singh / The National

In pictures: Where Dubai rents have risen and fallen, Q1 2014

Find out how rental prices in the prime locations in Dubai have altered during the first three months of the year and the current rates you will pay according to data provided by Asteco.

 Miele coffee maker making Cappuccino at Miele Gallery in Sama Tower in Dubai. The cost of this coffee maker is around Dh 17,000. Pawan Singh / The National

Space-age coffee comes at a price from Miele

Miele have taken the coffee machine to a new level with its Dh17,000 offering that is built into your kitchen.

 The bridge of Seajacks Hydra, as the wind farm installation vessel undergoes finishing touches and testing works at Lamprell’s Hamriyah facility in Sharjah before its planned delivery on June 2, 2014. Jeffrey E Biteng / The National

In pictures: Building the Seajacks Hydra

The Seajacks Hydra, a wind farm installation vessel, is undergoing finishing touches and testing works at Lamprell’s Hamriyah facility in Sharjah before its planned delivery on June 2, 2014.

 The Wind, Energy, Technology and Environment Exhibition takes place from April 14 to April 16. Above, the Dewa showroom during last year’s Wetex. Jaime Puebla / The National

April corporate and economic calendar for the UAE and overseas

From Cityscape to Wetex to stock-market holidays to nations reporting first-quarter GDP figures, here is our helpful calendar of April's business events in the UAE and internationally.

 The rush of new supply of hotel rooms pushed Dubai occupancy rates down to 87 per cent. Sarah Dea / The National

Dubai hotel room rates rise 10 per cent

The rush of new supply pushed occupancy rates down to 87 per cent, a dip of 2.6 per cent from the previous year. Winter months are the strongest for Dubai hotels, with occupancy and prices falling to half their peaks by July.

 Get the latest information on credit cards, bank accounts and loan products in the UAE. Mark Lennihan / AP Photo

Rates report: Latest on UAE loans, accounts and credit cards

Souqamal.com brings you the latest interest rates on banking products in the UAE.

Events

To add your event to The National listings, click here

Get the most from The National