Dubai stocks jump over 9.8% as rally continues

Some oil traders are betting that $60 a barrel will be a floor, others are not convinced and think a renewed slide towards $50 remains a possibility
Dubai stocks jump over 9.8% as rally continues
(AFP/Getty Images)
By Reuters
Sun 21 Dec 2014 09:46 AM

(Update 11:11): Gulf stock markets rose sharply in early trade on Sunday, continuing a rally which began on Thursday after Brent crude oil bounced back above $60 a barrel and Saudi Arabia's government said it would continue spending heavily despite cheaper oil.

Dubai's stock index was 6.9 percent higher after 10 minutes of trade, adding to Thursday's 13.0 percent leap. The bourse as a whole was up 9.88 percent by 11:11am. Blue chip Emaar Properties rocketed 11.1 percent and is currently up 12.09 percent.

Abu Dhabi's market, which tends to be less volatile than Dubai because of a lower degree of leverage, gained 3.9 percent, led by real estate stocks; Aldar Properties soared 13.0 percent.

Qatar's stock index
jumped 9.0 percent, as Vodafone Qatar climbed its 10 percent daily limit
in the opening minutes, as did Barwa Real Estate.

Qatar's market was closed for a national holiday on
Thursday so it missed out on the start of the Gulf's rally, when stocks were
buoyed by the rebound of Brent crude oil above $60 a barrel.

Another positive for Qatar was that while FIFA's
executive committee unanimously agreed on Friday to publish an
"appropriate" version of the investigation into the bidding process
for the 2018 and 2022 World Cups, it insisted that Russia and Qatar would still
stage the tournaments.

Kuwait gained 1.5 percent. The market in Oman , where the economy is believed to be more vulnerable to low oil prices because of the government's constrained finances, edged up 0.8 percent.

Earlier on Sunday it was forecast that a strong rebound by Gulf stock markets was likely to as the outlook for oil prices remains cloudy, but the panic which engulfed stocks earlier this month is unlikely to return.

Gulf bourses surged on Thursday, with Saudi Arabia up 8.9 percent and Dubai up 13.0 percent, after Brent crude oil rebounded above $60 a barrel. It ended on Friday up $2.11, or 3.4 percent, at $61.38.

Although some oil traders are betting that $60 a barrel will be a floor, others are not convinced and think a renewed slide towards $50 remains a possibility. Uncertainty is so high that the CBOE crude oil volatility index last week hit its highest level since 2011.

Any renewed drop of oil this week could hit Gulf stock markets again, particularly Saudi petrochemical stocks.

However, the bourses appear to have found at least short-term bottoms, and Gulf investors are no longer so worried that lower oil prices will mean sharp cut-backs in government spending in the region. Governments of the big Gulf economies will be able to use their huge fiscal reserves to cover any budget deficits for years.

Saudi Arabian Finance Minister Ibrahim Alassaf said on Wednesday that his government would continue spending strongly on development projects and social benefits in its 2015 budget, which is expected to be announced on Monday. United Arab Emirates, Kuwaiti and Qatari ministers have made similar comments.

Fitch Ratings affirmed its AA debt rating for Kuwait at the weekend, citing "an exceptionally strong sovereign balance sheet".

Qatar's bourse may rise strongly on Sunday because the market was closed for a national holiday on Thursday, missing out on the Gulf's rally.

FIFA's executive committee unanimously agreed on Friday to publish an "appropriate" version of the investigation into the bidding process for the 2018 and 2022 World Cups but said Russia and Qatar would still stage the tournaments, which was good news for the Qatari market.

The two most vulnerable Gulf economies are Bahrain and Oman; Fitch cut Bahrain's outlook to negative at the weekend, following a similar move by Standard and Poor's. However, liquidity appears so low and stocks are so tightly held in Bahrain that the Bahraini stock market has actually outperformed the region in recent weeks.

The executive president of Oman's State General Reserve Fund, its largest sovereign wealth fund, told Reuters at the end of last week that the SGRF had boosted its buying of shares in the local market as prices had slid to attractive levels.

Egypt's stock market, which also began rebounding on Thursday, may get a further boost from news that Fitch upgraded Egypt's debt to B, citing encouraging government policies.

"The government has embarked on a policy course designed to tackle some of the serious structural weaknesses that have emerged or intensified in recent years," it said.

"Fuel subsidy cuts and tax hikes have been implemented as part of a clear five-year fiscal consolidation strategy. Power shortages are being tackled, overdue payments to oil companies reduced, investment laws revised and disputes with foreign investors settled. The measures appear to have strong political backing."

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