30/12/2015 06:24 AST
The UAE’s equity markets ended the day in the green on Tuesday after dropping in early trade following Saudi Arabia’s anticipated budget announcement.
The Dubai Financial Market (DFM) index rose 0.49 per cent to reach 3,134.82, having touched a low of 3,078 about an hour after trade opened before bouncing back. The Abu Dhabi Securities Exchange (ADX) general index was also up 1.03 per cent to reach 4,296.16.
On Monday after regional stock markets had closed, the Saudi Arabia government announced an 840 billion riyal budget for 2016, marking a drop from the 975 billion riyal budget this year.
The announcement showed soaring budget deficits of 367 billion riyals in 2015, with the government saying it planned to cut the deficits to 326 billion riyals in 2016. Officials said there are plans to cut spending in 2016, with cuts being seen in energy subsidies as petrol prices were hiked over 50 per cent on Monday.
Nabil Farhat, partner at Al Fajr Securities, said the UAE’s markets managed to absorb the shocks that were seen in early trade on the back of the Saudi budget announcement.
“The valuations in the [UAE] stock market are the cheapest in the GCC, and the price-to-book [ratio] is almost one to one. The valuations have already priced in oil prices, so if we can manage liquidity properly, then we won’t see severe movements in stock prices,” he said.
Farhat added, however, that he expected the same challenges from 2015 such as low oil prices and geopolitical tension to continue taking a toll on markets in 2016.
“If oil prices stabilise, we can expect to see a bottom out followed by recovery, but if they don’t, [2016] could be another volatile year. If the latest forecast from Opec [Organisation of Petroleum Exporting Countries] is right, we’re going in the same direction we’re in; low liquidity, volatile markets; but if they’re wrong and there is demand for oil, we’re going to see stock prices picking up and liquidity improving,” he said.
In an emailed statement from Saxo Bank, Ole Hansen, the bank’s head of Commodity Strategy, said the pre-Christmas rally in crude oil has ground to a halt ahead of the new year.
“Iran is gearing up to flood the market with 500,000 barrels/day within weeks of sanctions being lifted, while the ceasefire in Libya may also add extra barrels. Brent crude oil’s premium over WTI has evaporated with the lifting of the US export ban shifting the oil glut focus to the global market,” Hansen said.
Such over-supply may very well hurt the GCC’s equity markets, analysts said.
On DFM, Arabtec rose 1.63 per cent, continuing to top the market in trade value as it accounted for 28 per cent of the Dh419.8 million traded in the market.
Meanwhile, Gulf Finance House jumped 7.53 per cent, Amlak gained 1.46 per cent, and Emaar went up 0.71 per cent. Tabreed and Dubai Islamic Bank dropped 0.82 per cent and 0.16 per cent respectively.
In the capital, the banking sector led the way in gains as the National Bank of Fujairah topped the gainers’ list with a 14.86 per cent increase.
It was followed by Abu Dhabi Islamic Bank with a 3.67 per cent jump, National Bank of Ras Al Khaimah and Ras Al Khaimah Co. for White Cement and Construction Materials with 3.33 per cent each, and First Gulf Bank with 2.78 per cent.
Of the 32 stocks traded on DFM, 20 went up, nine went down, and three remained unchanged. Of the 31 stocks traded on ADX, 14 advanced, 10 declined, and seven remained flat.
Gulfnews
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