Even the announcement of a deal between Dubai World and its creditors was not enough to lift UAE stock markets late last week, as global factors continue to worry Gulf investors. Those fears are likely to intensify today after most world markets retreated on Friday.
"The picture outside and inside [the Gulf], is not looking good right now," said Saad Chalabi, an institutional trader at Al Ramz Securities in Abu Dhabi. The long-awaited Dubai World deal, in which the seven top bank lenders to the conglomerate agreed to accept new repayment terms, turned out to be somewhat anticlimactic in the markets. "Before this announcement, we had hopes that Dubai World had something good to tell us," Mr Chalabi said. But the deal "in reality doesn't tell us anything new".
The deal was announced shortly before the markets opened on Thursday and regional bourses moved sharply higher early in the day before traders fully processed the implications. "All the smart money sold right into that volume immediately," Mr Chalabi said. The Dubai Financial Market General Index eased 0.04 per cent last week to 1,691.71. The index so far is the worst performer in the GCC, falling 6.21 per cent for the year to date. The Abu Dhabi Securities Exchange General Index declined 0.2 per cent for the week to 2,780.63, leaving it up 1.3 per cent for the year.
The Abu Dhabi Islamic Bank Index, which tracks Sharia-compliant companies in the UAE, fell 1.41 per cent last week. Not surprisingly, shares of banks moved higher on the Dubai World news. In Dubai, Emirates NBD, the region's biggest lender by assets, rose 0.3 per cent to Dh2.23 and Dubai Islamic Bank, the UAE's largest Islamic bank, advanced 0.9 per cent. In the capital, Abu Dhabi Commercial Bank shares climbed 1.6 per cent higher to Dh1.83.
This week, investors will be watching closely to see how negative sentiment from the euro zone affects Arab markets. Mr Chalabi says there is reason for concern as European policymakers continue to grapple over the best approach to their financial troubles. Last week, Germany's surprise decision to ban some short selling sent stock markets lower. "Germany is trying to do the impossible," Mr Chalabi said, adding that "the whole idea of Europe is on shaky ground".
Alfred Fayek, the managing director of MENA equity sales for the investment firm EFG-Hermes in Dubai, said the ripple effects from the EU were also being felt in the Gulf through lower oil prices. After reaching US$89 earlier this month, the price of Brent crude now is about $70, which could eventually put pressure on government spending in the Gulf if prices do not rebound. That correlation was reflected in the performance of Saudi Arabia's Tadawul All-Share Index yesterday as its trading week began with a loss of 1.3 per cent.
In the previous week ended last Wednesday, the Tadawul fell 2.1 per cent. However it was still the best performing market in the GCC, up 4.5 per cent for the year. Elsewhere in the region for the trading week that ended on Thursday, Qatar's QE Index lost 1.7 per cent to 7,082.51, while Oman's measure edged up 0.01 per cent to 6,484.12. Bahrain's index lost 2.3 per cent to 1,498.66, and Kuwait's gauge retreated 0.6 per cent to 7,063.
halsayegh@thenational.ae