By Issam Kassabieh
GCC markets are all expected to benefit from rising prices during 2018 as a result of OPEC's decision to extend its cuts till the end of the year, and the USA maintaining its rig counts to a globally-favourable level, writes Issam Kassabieh, research department analyst, Mena Corp.
GCC markets are all expected to benefit from rising prices during 2018 as a result of OPEC’s decision to extend its cuts till the end of the year, and the USA maintaining its rig counts to a globally-favourable level.
However, the UAE’s markets are expected to gain the most.
The UAE’s ability to diversify and strengthen its non-oil sector while oil prices were below $50 was highly successful and although the outcomes are not yet clear, recovering oil prices will help those sectors surface by boosting GDP per capita, consumer spending and by fuelling government spending – which is a main trigger to private sector growth here.
ADNOC Distribution is set to benefit from $60-plus oil prices throughout 2018 as its mother company secures more profits and translates them into a growth strategy that is able to expand to more distribution stations, and thus higher revenues (aside from higher margins as a result of higher prices).
Emaar Malls, Emaar Properties’ retail arm, is expecting the opening of its Dubai Mall extension along with the development of Emaar Hills Mall, which will be a significant addition to its existing assets.
The following addition to its leasable area will result in higher revenues especially when supported by rising real estate prices prior to Expo 2020, which will attract footfall to the emirate and in turn also strengthen retail, the subsidiary’s main focus.
Air Arabia, Sharjah’s airline might arguably be negatively impacted by rising oil prices, but as oil prices stabilise, hedging strategies become clearer and can reduce unfavourable risk.
Also supported by growth in the aviation sector, which is reflected by the growing aircraft orders in the GCC and especially the UAE, along with recovering disposable incomes, the airline’s revenues are expected to improve with higher Passenger Load Factors (PLF).
Finally, 2018 is expected to attract more foreign direct investment into the country and its local markets as Expo 2020 approaches, especially with global reports highlighting the UAE’s growing GDP, which is supported by recovering oil prices and increasing government spending.
The latter will in turn help revive equity markets and increase trading volumes as lagging stocks recover, which will then increase the market’s commission-based revenue.