Gulf Markets Seen Steady Following Early-Year Surge

Gulf stock markets are expected to be steady on Sunday following an early-year surge as investors wait for fourth-quarter earnings to determine whether recent gains are justifed.

The Dubai, Abu Dhabi, Qatar, Oman and Saudi Arabia benchmarks have all hit five-year highs in January.

Oman rose 3.9 per cent last week alone to end at 7,156 points, while Qatar is the top regional performer in 2014, rising 4.8 per cent. This compares with a 3.3 per cent drop for MSCI’s emerging equities index, which slumped to a four-month low on Thursday.

“Omani equities have underperformed during the last year as compared to the other regional markets, especially the UAE, so this is a catch-up rally,” says Kanaga Sundar, Gulf Baader Capital Markets’ head of research.

“Oman gives one of the highest dividend yields and valuations are pretty reasonable, while local institutions have pumped in liquidity since beginning of 2014, which is helping support market upside.”

Oman is likely to consolidate for now around 7,200 points, having made a technical breakout last week when it crossed the 6,900 area, where the market peaked last August, he says – investors will wait on quarterly earnings to “show if fundamentals support the rally or not”.

“After the UAE led gains last year, we could see Oman, Qatar and Saudi be the frontrunners in 2014,” says Sundar.

“Valuations are still reasonable compared to emerging markets and Q1 in the Gulf is historically a strong quarter as individual investors and institutions relocate funds to chase dividends.”

Egypt stocks may react positively after army chief General Abdel Fatah al-Sisi gave his clearest signal yet of his interest in becoming president, a move that could turn the clock back to the days when men from the military controlled the presidency.

Cairo’s benchmark index has surged since the army ousted Egypt’s first democratically elected leader Mohamed Mursi last July and on Thursday reached its highest close since January 2011, when former president Hosni Mubarak was still in power.

Markets in the United Arab Emirates are closed on Sunday for a religious holiday.

The global market environment is modestly positive; equities and oil prices rose on Friday after surprisingly weak U.S. jobs data supported the view that the U.S. central bank would be gradual in scaling back its stimulus.