The year turned out to be challenging for Mena and global markets. Global economic growth and trade slowed down, corporate profits fell, commodity prices corrected further, the US dollar strengthened and uncertainty regarding a possible hike in US interest rate persisted.
Globally, questions were raised around the sustainability of economic growth in the US as the unemployment rate declined and other sets of economic data did not resonate a strong recovery. Thus, we expect a rise in US interest rates to be gradual.
Growth in Japan remains elusive, questioning the country’s Abenomics policies. In Europe, economic growth picked up driven by quantitative easing, however inflation is still missing which is a cause for concern. Asia showed a mixed picture with oil-importing countries benefiting from lower prices resulting in lower inflation and lower interest rates, while commodity-dependent and export-oriented economies suffered.
China, which has been a global growth engine for the last decade, started to show early signs of slowing down. The effect was particularly visible in the commodity market, where most of the commodities corrected by about 20 per cent in dollar terms over the year.
As we step into 2016, the overall economic environment remains challenging.
The IMF has forecast a global economic growth of just under 3 per cent for next year, which we see as reasonable given the current environment.
Mena markets painted a similar picture this year. On the back of a declined oil price, the region’s markets corrected by 17 per cent. Oil continues to play an important role in the region, despite various steps taken by the GCC countries to diversify their economies.
We anticipate that the weakness in the oil price will continue in the near term, given the excess supply of 2.5-3 million barrels per day and oil producers who continue to pump record quantities to gain market share. With oil hovering below US$40 per barrel, marginal oil producers will be forced to lower their production. According to the US Energy Information Administration, US crude output(particularly shale producers) has declined by 500,000 bpd this year.
Next year, it is expected that nearly 1-1.5 million bpd of further oil supply will be curtailed while demand could grow by the same amount and reach equilibrium.
In the meantime, we foresee oil prices might remain subdued for another couple of quarters.
Year 2016 will prove to be challenging for Mena markets. However, we believe the region will grow between 2.5-3 per cent given the current pipeline of projects and the governments’ undeterred strategies to continue spending and commitment to completing these projects.
The low oil price also provided an opportunity to embark on much needed reforms. This year we saw discussions around the introduction of various reforms such as taxes, cuts to subsidies or sale of assets by the government.
Next year, we expect more clarity on the implementation of these reforms, although we foresee this could be a slow and a gradual process. Looking at corporate profitability, we believe a low single-digit growth is more likely for the next year. Among various sectors, we think that the non-cyclical sectors, that is consumer and utility, will do better compared with commodity and financials.
Over the past year-and-a-half, Mena markets corrected sharply and valuations look attractive as the market is trading at the lower end of the last five year’s range. We do not expect fundamental changes in the near term as the direction of the oil price will ultimately determine the timing of a re-rating for the Mena markets. Stability in the oil price will be required to draw a constructive case.
Thus, in the near term, market performance could remain volatile and subdued. However, for medium to long term investors the current market offers an opportunity to generate decent returns.
Saleem Khokhar is the head of fund management at National Bank of Abu Dhabi
The UN General Assembly President in quotes:
YEMEN: “The developments we have seen are promising. We really hope that the parties are going to respect the agreed ceasefire. I think that the sense of really having the political will to have a peace process is vital. There is a little bit of hope and the role that the UN has played is very important.”
PALESTINE: “There is no easy fix. We need to find the political will and comply with the resolutions that we have agreed upon.”
OMAN: “It is a very important country in our system. They have a very important role to play in terms of the balance and peace process of that particular part of the world, in that their position is neutral. That is why it is very important to have a dialogue with the Omani authorities.”
REFORM OF THE SECURITY COUNCIL: “This is complicated and it requires time. It is dependent on the effort that members want to put into the process. It is a process that has been going on for 25 years. That process is slow but the issue is huge. I really hope we will see some progress during my tenure.”
Brief scoreline:
Liverpool 5
Keita 1', Mane 23', 66', Salah 45' 1, 83'
Huddersfield 0
How to protect yourself when air quality drops
Install an air filter in your home.
Close your windows and turn on the AC.
Shower or bath after being outside.
Wear a face mask.
Stay indoors when conditions are particularly poor.
If driving, turn your engine off when stationary.
The specs
Engine: 2.7-litre 4-cylinder Turbomax
Power: 310hp
Torque: 583Nm
Transmission: 8-speed automatic
Price: From Dh192,500
On sale: Now
Company Profile
Name: Thndr
Started: 2019
Co-founders: Ahmad Hammouda and Seif Amr
Sector: FinTech
Headquarters: Egypt
UAE base: Hub71, Abu Dhabi
Current number of staff: More than 150
Funds raised: $22 million
Some of Darwish's last words
"They see their tomorrows slipping out of their reach. And though it seems to them that everything outside this reality is heaven, yet they do not want to go to that heaven. They stay, because they are afflicted with hope." - Mahmoud Darwish, to attendees of the Palestine Festival of Literature, 2008
His life in brief: Born in a village near Galilee, he lived in exile for most of his life and started writing poetry after high school. He was arrested several times by Israel for what were deemed to be inciteful poems. Most of his work focused on the love and yearning for his homeland, and he was regarded the Palestinian poet of resistance. Over the course of his life, he published more than 30 poetry collections and books of prose, with his work translated into more than 20 languages. Many of his poems were set to music by Arab composers, most significantly Marcel Khalife. Darwish died on August 9, 2008 after undergoing heart surgery in the United States. He was later buried in Ramallah where a shrine was erected in his honour.
COMPANY%20PROFILE
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Fifa Club World Cup quarter-final
Kashima Antlers 3 (Nagaki 49’, Serginho 69’, Abe 84’)
Guadalajara 2 (Zaldivar 03’, Pulido 90')
COMPANY%20PROFILE%20
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Company%20Profile
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The%20specs
%3Cp%3E%3Cstrong%3EEngine%3A%20%3C%2Fstrong%3ESingle%20front-axle%20electric%20motor%3Cbr%3E%3Cstrong%3EPower%3A%20%3C%2Fstrong%3E218hp%3Cbr%3E%3Cstrong%3ETorque%3A%20%3C%2Fstrong%3E330Nm%3Cbr%3E%3Cstrong%3ETransmission%3A%20%3C%2Fstrong%3ESingle-speed%20automatic%3Cbr%3E%3Cstrong%3EMax%20touring%20range%3A%20%3C%2Fstrong%3E402km%20(claimed)%3Cbr%3E%3Cstrong%3EPrice%3A%20%3C%2Fstrong%3EFrom%20Dh215%2C000%20(estimate)%3Cbr%3E%3Cstrong%3EOn%20sale%3A%20%3C%2Fstrong%3ESeptember%3C%2Fp%3E%0A
Abu Dhabi GP schedule
Friday: First practice - 1pm; Second practice - 5pm
Saturday: Final practice - 2pm; Qualifying - 5pm
Sunday: Etihad Airways Abu Dhabi Grand Prix (55 laps) - 5.10pm
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Israel Palestine on Swedish TV 1958-1989
Director: Goran Hugo Olsson
Rating: 5/5
Confirmed%20bouts%20(more%20to%20be%20added)
%3Cp%3ECory%20Sandhagen%20v%20Umar%20Nurmagomedov%0D%3Cbr%3ENick%20Diaz%20v%20Vicente%20Luque%0D%3Cbr%3EMichael%20Chiesa%20v%20Tony%20Ferguson%0D%3Cbr%3EDeiveson%20Figueiredo%20v%20Marlon%20Vera%0D%3Cbr%3EMackenzie%20Dern%20v%20Loopy%20Godinez%0D%3Cbr%3E%3C%2Fp%3E%0A%3Cp%3ETickets%20for%20the%20August%203%20Fight%20Night%2C%20held%20in%20partnership%20with%20the%20Department%20of%20Culture%20and%20Tourism%20Abu%20Dhabi%2C%20went%20on%20sale%20earlier%20this%20month%2C%20through%20www.etihadarena.ae%20and%20www.ticketmaster.ae.%0D%3Cbr%3E%3C%2Fp%3E%0A