GCC stocks to rally, but fluctuate

Gulf markets are expected to start rallying after the departure of Hosni Mubarak as president of Egypt but will remain volatile because of persistent tensions in other Arab nations, according to a Saudi investment company.

After suffering from volatility and downturns because of protests in Egypt and other Arab countries, the bourses in the six-nation Gulf Cooperation Council (GCC) will likely see a recovery in the short term, said NCB Capital, an affiliate of Saudi Arabia’s largest bank, National Commercial Bank.

“After 18 days of protests, the Egyptian President stepped down on Friday. We expect the Saudi bourse and the Gulf markets to rally over the next few days as tensions in the region ease and out of relief that the situation did not deteriorate.”

In a two-page study issued on Saturday, NCBC said GCC equity markets could see a “short-term rally” following the peaceful transition of power in Egypt, the most populous Arab nation with around 80 million people.

Its figures showed that Saudi Arabia’s bourse, the largest and busiest in the Middle East, is roughly flat year-to-date and down about one percent since the start of the demonstrations in Egypt.

Of the other main Gulf markets, most are down slightly for the year apart from Qatar, which was up by around three per cent.

“We have highlighted in earlier reports that we do not expect a material impact on companies in Saudi Arabia from events in Egypt, however increased risk aversion has caused weakness in the market,” it said.

“With Mubarak’s departure, we believe a general relief in tensions will support a short-term rally in Gulf markets over the next few days….while the immediate impact of Mubarak’s departure is positive for the markets, we believe, there are potentially further areas of concern in the region.”

NCBC said it expected that Egypt itself would likely see volatility once its market opens on Sunday adding that the country has a “long way to go in revising its Constitution, organizing political parties, and holding free and fair elections.”

“Protests in Jordan, Yemen, Algeria and political uncertainty in Lebanon could continue which could increase investor concerns on the region.”

Official data showed most Arab stock markets had slightly rebounded over the past two days following a sharp fall just after the eruption of protests in Egypt in late January. The combined market capitalisation of regional exchanges ended Thursday at around $976 billion, up from $954 billion at the end of January.

Saudi Arabia’s Tadawul bourse was the main gainer, swelling by nearly $15 billion to reach aro9und $355bn on Thursday. Dubai gained about $1bn while there was an increase of nearly $3bn in Abu Dhabi and $1bn in Qatar. Kuwait slipped by $2bn.
 

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