Regional investors this week will be eyeing chatter on quantitive easing by the US Federal Reserve and watching oil prices closely to determine market moves.
Investors hope for international pointers
Regional investors will be hoping for cues from international commodities markets this week, after Opec failed to reach an accord on oil output.
"Investors will be keeping a close watch on the international front and prices of commodities," said Sachin Mohindra, the lead manager for the GCC-focused fund at Invest AD. "Everyone is looking at global cues to determine market cues for our region," he added.
By the close last week, the Abu Dhabi Securities Exchange General Index had risen 1.1 per cent to 2,703.34 points, while the Dubai Financial Market General Index had lost 0.6 per cent to 1,556.71 points on lacklustre trading.
Oil prices slumped the most in four weeks on Friday after Al Hayat newspaper in London reported Saudi Arabia would raise oil production to 10 million barrels per day (bpd) next month, citing unidentified senior Opec and industry officials.
Brent crude for delivery next month decreased 79 cents, or 0.7 per cent, to $118.78 a barrel on the ICE Futures Europe exchange in London.
Saudi Arabia, Kuwait, Qatar and the UAE proposed an increase of 1.5 million bpd in output targets at the Opec meeting in Vienna last week.
The group failed to reach an accord after the plan was opposed by Libya, Angola, Ecuador, Algeria, Iran and Venezuela.
Elsewhere in the region, Kuwait's measure lost 0.5 per cent to 6,306.70 last week; Bahrain's index added 0.6 per cent to 1,347.69 ; and Oman's measure lost 1 per cent to 6,016.48.
"Volumes and liquidity on the bourses are very low at the moment, and very news driven. There doesn't seem to be a short-term trigger apart from the potential reclassification of our markets," Mr Mohindra said.
In the UAE, the index benchmarker MSCI is expected to make a decision on June 21 whether to upgrade the country to "emerging market" status, a move expected to bring billions of dollars of liquidity to the local exchanges if granted. The UAE is considered a "frontier market".
Abdullah al Turaifi, the chief executive of the country's Securities and Commodities Authority, said he was "optimistic" about an upgrade by the index benchmarker.
The Abu Dhabi Securities Exchange and the Dubai Financial Market said on May 29 market participants were ready to use an upgraded trading system, a criteria set by the MSCI. As of last week, members and custodians could execute trades based on the delivery versus payment (DvP) system.
DvP is a securities industry procedure in which payment for a security must be made at the time the security is delivered. Usually, the payment is made to a bank, which in turn pays for the security.
MSCI will revalue the bourses' frontier market status by examining, among other measures, economic development, trading volumes and market accessibility.
In the US, the Federal Reserve's US$600 billion programme of debt buying, also known as quantitative easing (QE), ends this month.
"Any abrupt end to QE will definitely have an impact on our region," Mr Mohindra said. "It will impact commodity prices, hike up interest rates gradually … our markets will have to adjust and credit will become more expensive."
Ben Bernanke, the Fed chairman, last week said the recovery was "frustratingly slow", but gave no indication of a new round of quantitative easing. US markets corrected sharply last week, as investors were concerned the global economy would slow further after the Fed programme ends. The Dow Jones Industrial Average slumped to the lowest since 2002, down 1.6 per cent to 11,951.91 points.
In Saudi Arabia, the Tadawul All-Share Index declined 0.48 per cent yesterday to 6,509.48, posting losses on the petrochemical sector triggered by lower oil prices.
Sabic declined 0.24 per cent to 102.50 Saudi riyals. Saudi Kayan Petrochemical Company lost 0.27 per cent to 18.55 riyals, while Rabigh Refining & Petrochemicals lost0.37 per cent to 26.90 riyals.