x Abu Dhabi, UAEMonday 22 January 2018

Gulf's focus turns to earnings results

Investors bank on a rosy third quarter to boost flagging sentiment pressuring Gulf markets.

The Abu Dhabi Securities Exchange General Index slipped 0.1 per cent last week to 2,533.41 points. Lee Hoagland / The National
The Abu Dhabi Securities Exchange General Index slipped 0.1 per cent last week to 2,533.41 points. Lee Hoagland / The National

Fund managers are banking on rosy third-quarter results to help improve sentiment that has soured quickly in recent weeks, putting pressure on Gulf stock markets.

Companies will begin to report their results for the third quarter this week. The numbers may give equities a small boost.

"We expect a positive continuation in third-quarter numbers, as we had in the second quarter," said Marwan Shurrab, the chief trader at Gulfmena Investments, an asset management company in Dubai.

In the UAE, banks are expected to outperform as local macroeconomic fundamentals improve, and transport should report strong earnings because of lower oil prices, said Tariq Qaqish, a fund manager at Al Mal Capital in Dubai.

Bank deposits exceeded loans for an 11th month in August, according to data published by the central bank on Thursday. Lending increased 0.5 per cent in August from July to Dh1.05 trillion, while deposits dropped 3.2 per cent to Dh1.07tn.

"The statistics show improved fundamentals, which would help banks grow and lend more with improved margins," said Mr Qaqish.

Global markets were affected last week by a drop in oil prices and concern about a slowdown in global economic growth stemming largely from the prolonged debt crisis in the euro zone.

The sell-off across markets started in August when deficit problems in Greece became more apparent, threatening to spread to the larger euro-zone economies of Spain and Italy. And Gulf markets continue to take their cues from the West.

"If between now and the fourth quarter it becomes clear that the global economy is facing a recession and problems in Europe are not resolved, it will drag on regional market performance," Mr Shurrab said.

The Abu Dhabi Securities Exchange General Indexslipped 0.1 per cent last week to 2,533.41 points, bringing the overall decline for the third quarter to 6.7 per cent. Dubai's main benchmark, the Dubai Financial Market General Index, fell 1 per cent to 1,431.71for the week, extending its decline for the quarter to 5.6 per cent. Qatar's QE Index was down 0.1 per cent to 8,393.92 last week.

Qatar National Bank, the country's largest bank by assets, and National Leasing, a consumer finance company, are expected to report third-quarter results on Wednesday.

In Egypt, new political developments and continued protests weighed on equities last week. The country's benchmark EGX 30 Index was down 3.1 per cent to 4,137.35 at the end of the week.

Barring political volatility, Egypt's stock market this week is expected to experience a flurry of activity arising from a rights issue, a meeting of shareholders to delist a company, a ruling in a court case and dividend payments to investors.

Subscription for Citadel Capital's 1.05bn Egyptian pound rights issue ends tomorrow. The Egyptian private equity company wants to raise its capital from 3.3 billion pounds to 4.4bn pounds by issuing 210 million shares at 5 pounds each.

Also tomorrow, Olympic Group is expected to hold its extraordinary general meeting to look into delisting from the Egyptian Exchange.

The appliance manufacturer was acquired by Sweden's AB Electrolux last month and now owns 98.33 per cent of the shares. Electrolux intends to offer remaining minority shareholders a continued opportunity to sell their shares in Olympic Group over the next 12 months.

On Tuesday, Egypt's administrative court should rule on a case involving the Madinaty project being built by Talaat Moustafa Group (TMG). The project has been mired in a legal row since the court said last year that the land on which it is built should have been sold at auction. The government revoked the original contract and returned the land to TMG under a new deal. The new contract is being disputed.

On Wednesday, Orascom Construction Industriesis to pay a dividend of US$1.10 per share.

Elsewhere in the region, Oman's measure was down 1 per cent last week to 5,602.29, and Kuwait's slipped 0.2 per cent to 5,833.10. The Saudi Tadawul All-Share Index rose 0.07 per cent yesterday to close at 6,116.71.