Dubai’s Bourse Leads Region-Wide Gains After Fed Keeps Stimulus Steady

Dubai’s bourse led a regional uptrend on Thursday after the surprise decision by U.S. Federal Reserve to maintain its bond-buying programme.

Compared to emerging markets in Asia, the impact on markets in the Gulf was modest; since it does not rely on foreign capital inflows, the region had been much less worried than Asia about any tightening of U.S. monetary policy.

But the Fed’s decision was still positive for the Gulf by supporting demand for its oil exports, and by implying global interest rates would remain low, benefitting the property sector.

“Regionally, our foreign exposure is increasing and they’re putting more money here,” said Fouad Darwish, head of brokerage at Kuwait’s Global Investment House. “Investors that were factoring in a Fed tapering were on the sidelines but are now back in.”

Dubai’s bourse rose 2.2 per cent to 2,666 points, its highest close since Aug. 26 and three per cent away from this year’s peak, hit in August. Deyaar Properties surged 6.3 per cent to a multi-year high.

Mashreq, Dubai’s third-largest bank by market value, jumped its 15 per cent daily limit after the lender said it was boosting the ceiling on foreign ownership in the stock to 20 per cent. One analyst suggested the bank might be doing this in preparation to raise capital. Turnover in the illiquid stock remained very low.

Abu Dhabi’s measure gained 1.2 per cent, halting a three-session decline. Kuwait’s index rose 0.5 per cent to 7,848 points, a three-week high; the market peaked at 8,437 points in late May.

“There is optimism that there will no escalation in the Syrian conflict and third-quarter earnings will be better than second-quarter. Many stocks are undervalued and reaching the 8,000 level for the index is easy,” Darwish said about Kuwait.

In Saudi Arabia, the measure rose 0.3 per cent to 8,025 points; gains were modest overall as investors awaited quarterly earnings announcements, set to begin in early October.

Because of the Fed decision, petrochemical shares led the index up with that sector adding 0.5 per cent.

“The market will trade in a range between the 8,050 and 8,200 levels until we see corporate results,” said Hesham Tuffaha, a Riyadh-based fund manager. “Unless we see a quarter-on-quarter growth of more than 10 percent, we can’t justify the market making new highs.”

The benchmark rose to 8,223 points on Aug. 21, a five-year high. Tuffaha said he expected the main earnings growth drivers to be petrochemical and telecommunications firms.

EGYPT

In Egypt, shares in Egypt Kuwait Holding surged 7.7 per cent, trimming its 2013 losses to 35.2 per cent. Cairo’s benchmark index added 0.3 per cent, extending its 2013 gains to 1.2 per cent.

After the Fed decision, “the U.S. dollar is falling in the parallel market and investors stopped speculating the currency will go up and are instead chasing higher returns in lagging stocks,” said Mohamed Radwan, director of international sales at Pharos Securities in Cairo.

The political backdrop in Egypt remains murky. Security forces and militants fought gun battles on Thursday during a government operation to wrest back control of a town near Cairo dominated by Islamist supporters of ousted President Mohamed Mursi. Explosives experts defused two primitive bombs on the Cairo metro line.

This was at least partly offset, however, by news that Egypt would shorten its curfew by two hours as of Saturday – a sign of increasing confidence within the government.

Egyptian central bank governor Hisham Ramez said on Thursday that Egypt had returned to Qatar $2 billion that the Gulf state had deposited with the central bank – an apparent indication that Cairo now felt it had enough financial support from Saudi Arabia, the United Arab Emirates and Kuwait, and no longer needed to rely on Qatar. The Qatari government had close ties with Mursi.