GCC rally shows signs of flagging

GCC stock markets began to run out of steam last week, and finished the week little changed but there was no sign that confidence in the economic outlook was failing.

However, the Opec oil production cuts of 2m bpd on Thursday came too late to be reflected in stock prices, and bourses could head lower this week. Oil prices headed lower on Friday in Western markets as traders reasoned that not enough had been done to tackle the glut of oil on the market.

On the other hand, stock market investors will be keeping a keen eye on the upcoming cabinet reshuffle in Saudi Arabia on May 3. If this results in a night of the long knives for the conservatives then the stock market could rally strongly on hopes for economic reform.

Anything that signals a green light for the $25 billion Saudi Gas Initiative, a joint venture with eight Western energy giants, will be perceived as hugely positive for Saudi Arabia. Infrastructure investment on this scale in the kingdom will benefit all and sundry as it gets underway.

Meanwhile, UAE investors are hopeful of news on reform. The long awaited Dubai Real Estate Law is one much anticipated event, legalizing the sale of freehold property to foreigners. Another delayed event is the federal decree creating the Dubai International Financial Centre.

So while the Iraq War rally may be over for local markets, there will probably plenty of positive local news to fuel a further upturn in stock values in the short term.