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Thu 20 Sep 2012 10:50 AM

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Profit-taking expected for Gulf on weak Chinese data

Asian shares extended losses on Thursday after data indicated little respite for Chinese manufacturers

Profit-taking expected for Gulf on weak Chinese data

Gulf investors are likely to take weak global cues as a sign to book some of the week's gains ahead of the weekend as wary short-term traders dominate.

Asian shares extended losses on Thursday after data indicated little respite for Chinese manufacturers, suggesting growth in the world's second-largest economy slowed further in the third quarter.

The China HSBC flash PMI ticked up to 47.8 in September from a nine-month low in August of 47.6. Since the index remained below 50, it indicated the sector was still contracting.

Most Gulf markets rallied on Wednesday after Japan's central bank announced it would boost asset purchases to stimulate the economy of the world's third-biggest oil consumer, but Saudi Arabia's bourse fell on third-quarter earnings concerns.

Dubai's index surged 1.6 percent to close at a 20-week high.

"Profit-taking will be on the table with weakness in international markets. Overall, we are still at a 90-percent correlation to global performance," says Marwan Shurrab, vice-president and chief trader at Gulfmena Investments.

Third-quarter earnings in the United Arab Emirates are expected to show strong growth and sustain the upbeat investor sentiment. Earnings season kicks off early October but UAE companies are likely to report financials later next month.

"We're quite optimistic for the rest of 2012. UAE markets have underperformed international markets for two years and the recent move (higher) doesn't mean we've even come close to highs of pre-crisis levels, while international markets have recovered completely," Shurrab adds.

Dubai's Drake & Scull International may see increased investor interest after the firm said it won a 1.3 billion dirhams ($353.9 million) contract in collaboration with Italy's Sicim.

Brent crude eased below $108 a barrel on Thursday after data showed China's manufacturing activity continued to contract, weakening sentiment further in a market already reeling from Saudi Arabia's pledge to keep global oil prices low.

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