Uncertainty will continue to weigh on local markets this week as political developments in the wider region unfold, and Japan, the world's third-largest economy, grapples with its currency and financial markets following the devastating earthquake and tsunami.
"The crises in Bahrain and Japan are both uncontrollable and unprecedented, which makes it difficult for any predictions on the direction of our markets, but at the same time causing a severe psychological impact on market sentiment," said Wadah al Taha, the chief investment officer at Al Zarooni Group in Dubai.
The security situation in Bahrain deteriorated last week, reaching its peak on Tuesday when King Hamad bin Issa Al Khalifa declared a three-month state of emergency. The Bahrain stock exchange reopened on Thursday after its closure the previous day.
The G7, a group of industrialised nations, held talks on Friday and agreed to weaken the Japanese currency, the yen, and calm markets after the devastating earthquake and tsunami. The Nikkei 225 Index rose 2.7 per cent to 9,206.75 points following the news.
All Gulf bourses declined last week as investors closed their positions and remained on the sidelines.
The Abu Dhabi Securities Exchange lost 2.7 per cent to 2,584.89 for the week, while the Dubai Financial Market General Index lost 3 per cent. The Abu Dhabi Islamic Bank MSCI Index added 5.7 per cent to 881.7. The UAE's stock exchange regulator, the Securities and Commodities Authority, will discuss draft regulations on fund management with asset managers tomorrow at the Hilton Hotel in Abu Dhabi.
Bahrain's measure lost 0.6 per cent to 1,414.44, while Kuwait's benchmark lost 2.2 per cent to 6,263.80.
Oman's benchmark lost 2.2 per cent to 6,270.22. Investors will also be watching for clues on the date of the initial public offering of Topaz Energy and Marine on the London Stock Exchange, announced last week. Shares in its parent company, Renaissance Services, rallied to a three-week high on Thursday following the news.
Qatar's QE Index lost 3.5 per cent to 8,185.72. Qatar Navigation, the country's main shipping operator, announced on Thursday a decline in profits for the year to 479 million rials, compared with more than 1 billion rials the previous year. Qatar Navigation also recommended a cash dividend of 4 rials a share after the company's general assembly, which is scheduled to take place on April 6. Separately, Qatar International Islamic Bank agreed to buy full control of the Islamic Bank of Britain, according to a filing. The Qatari lender is offering one pence a share for the British bank.
The Saudi Tadawul All-Share Index lost 3.6 per cent last week to 6,069.64, and was closed for trading yesterday, a national holiday. Saudi Arabia's King Abdullah introduced an additional social package estimated to cost 350bn riyals on Friday, helping to ease an estimated 135bn riyals worth of measures announced three weeks ago.
Investors in the region will also be closely watching for news on the reopening of its stock exchange. The exchange, which has been closed since January 27, must open before the end of this week to avoid being removed from the MSCI Emerging Markets Index.
"Everybody is watching this," said Fadi al Said, a fund manager at ING Investment Management in Dubai. "It's strategic for Egypt not to be dropped from the index, considering how hard neighbouring countries have been working to be given that classification."
Last week, Moody's ratings agency downgraded Egypt's sovereign bond ratings by one notch to "Ba3", from "Ba2", because of prolonged political uncertainty in the country and its impact on Egypt's fiscal position and broader economic health. Separately, Hillary Clinton, the US secretary of state, pledged US$90m in economic assistance to the country.
Oil lost 97 cents on Thursday. Brent crude futures for May declined 0.8 per cent to $113.93 a barrel, still over $100, which should bode well for economic activity in the GCC.
"The price of oil is exceeding the level where budgets have been dealt with for 2011," Mr al Taha said. "Looking beyond the short term, it is highly expected that the oil-producing states will be accumulating surplus in the coming months, which will enable their governments to spend more on strategic projects and social programmes and ease any hidden tension overall."