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18 April 2024

Year-end results will boost GCC investors’ confidence

By Nadim Kawach




Gulf stock exchanges are expected to remain unstable in the next few weeks after a loss of more than $124 billion (Dh455bn) damaged investors’ confidence and fears of fresh collapses gripped markets across the world.

But dealers ruled out a new collapse in the markets of the UAE and other GCC states despite uncertainty, possible new interest rate cuts and volatile oil prices.

Although the region’s economies are making huge leaps due to high oil prices, investors are adopting a wait-and-watch attitude towards results of listed companies, most of which are due in the first quarter.

“What happened to the markets of the UAE and other Gulf states have damaged the investors’ confidence because many suffered huge losses,” said Mohammed Yassin, General Manager of the Emirates Securities Company.

“It has created fear among investors and I don’t think this fear will just evaporate over night. We need to see the results of the companies, as performance in the next quarter will hinge on them. We need to see the market returning to gradual mode and we need to wait and watch how investors will react in the next period. I don’t expect another collapse, but before we see the results the market will remain volatile.”

The markets of the UAE, Saudi Arabia, Bahrain, Qatar, Kuwait and Oman lost nearly $124.8bn between January 16 and yesterday. The bulk of the losses were on the Saudi exchange, which dived by around $111bn.

The UAE’s market capitalisation suffered billions of dollars in losses before it recovered over the past two days to around $246bn, while there were slight gains in the other markets.

For most of January, the collective market capitalisation of the six bourses rose to $1.16 trillion on January 15 from $1.10trn on January 1 before it tumbled to nearly $1.03trn yesterday, according to the Abu Dhabi-based Arab Monetary Fund, which tracks the stock exchanges in the GCC and other Arab nations. “To call what happened in the UAE and other Gulf states a collapse is too much… it was a mere decline in the shares caused by fears of other market plunges, the sub-prime crisis in the US and growing speculation,” said Mohammed Al Asumi, a well-known Gulf economist.

“I don’t see any major problems but there will be fluctuations in the coming period. My advice to investors is to shed their fears and take the results of the companies as a basic analysis for their dealings.
They must avoid speculation and focus on long-term goals as a safe means of investment in these markets. I am sure many firms will announce excellent results because economic fundamentals say they are performing well, given the strong performance of the GCC economies.”

Another analyst said local markets have just started to regain their health but expected uncertainty in the coming weeks.

“I don’t think there will be collapses but the state of instability that dominated the regional markets last week will continue,” said Ziad Dabbas, share dealing advisor at the National Bank of Abu Dhabi.

“The reasons for this instability are that there are fears of fresh US interest rate cuts, the bleak economic outlook there and volatile oil prices. Investors must calm down and wait for results of listed companies. I believe many of them will announce good results and I hope it will contribute to restoring investor confidence and morale.”

In Saudi Arabia, which has the region’s largest stock market, dealers said the bourse had partially recovered losses but investors remained unsettled. “There is concern among investors but the market is almost back on track. Let’s wait and see what happens in the next few weeks,” said Malik Younus, an economist at the Saudi National Commercial Bank.