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29 March 2024

Gulf better insulated than rest of world to potential Greek default

A protester burns a euro note during a demonstration outside the European Union (EU) offices in Athens, Greece June 28, 2015. Greece said it may impose capital controls and keep its banks shut on Monday after creditors refused to extend the country's bailout and savers queued to withdraw cash, taking Athens' standoff with the European Union and the International Monetary Fund to a dangerous new level. (Reuters)

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By Reuters

The Greek debt crisis looks set to keep most Middle Eastern stock markets weak on Monday after Athens imposed capital controls and shut banks for a week, raising the prospect of Greece leaving the euro zone.

The Gulf is better insulated from such an event than many areas of the world, because it is not dependent on foreign investment and governments can use huge fiscal reserves to continue spending heavily.

Nevertheless, market sentiment in the region is being dampened by a broad slide in Asian stocks on Monday morning and by a roughly 1 per cent drop in Brent crude oil into the $62 a barrel area.

The Dubai Financial Market (DFM) was down 1.21 per cent at 10.30am, with 24 stocks trending lower, three moving up and two unchanged.

The Abu Dhabi Exchange (ADX) General Index too stood down by more than 1 per cent at the same time, with real estate major Aldar Properties leading the decline at -2.59 per cent.

Market sentiment has been hurt by the militant attacks in Kuwait and Tunisia during the weekend, although quiet currency markets suggest security worries in the Gulf have not become serious.

Dubai's stock index dropped 2.2 per cent to 4,056 points on Sunday, falling below its 200-day average of 4,082 points. A second straight daily close below the average would confirm a break, which would be technically bearish.

Egypt's market, however, may stay firm after showing signs on Sunday of forming at least a short-term bottom. The index gained 1.3 per cent in rising turnover as 14-day momentum posted a positive divergence, consistent with a bullish reversal.

The Cairo exchange said the second tranche of property firm Emaar Misr's initial public offer was oversubscribed about 36 times. Emaar Misr attracted subscriptions for 3.23 billion shares worth 12.3 billion Egyptian pounds ($1.6 billion) after offering 90 million shares. Now the offer is completed, at least some money pledged in subscriptions is expected to flow back into Egyptian stocks in the coming days or weeks.

Tunisia's stock market will open and react on Monday to the attack that killed 39 foreigners in the resort of Sousse.

After the Bardo museum attack in Tunis last March, which killed 23 people, the Tunisian stock index immediately fell 2.5 per cent. It began recovering the next day to regain its pre-attack level within three weeks.

This time, however, any recovery could prove slower as the latest attack was on a resort area previously considered safe for tourists.