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GCC markets’ earnings compensate cheap oil burden

Total value traded in the GCC equity markets declined by 20.7 per cent to $55.7 billion as compared to $70.2bn during December 2014

Positive earnings achieved by GCC equity markets in January softened the plunging oil prices’ burden that affected markets across the region, says a report from KAMCO.

Saudi-listed companies’ total net profits surged 3.2 per cent in 2014 supported by the significant improvement of earnings in the banking sector, KAMCO says in its latest GCC Markets Monthly Report.

Some investors expressed the opinion that the Saudi market sentiment has become somewhat positive, attributing attractive valuations to the saturation point that the market has reached in sale operations, adds KAMCO.

Moreover, with stabilising oil prices during the second half of January 2015, retail investors have started focusing on factors other than oil, says the report.

Consequently, three out of the seven equity markets achieved positive monthly returns, led by Saudi Arabia that gained 6.5 per cent followed by Oman at 3.4 per cent and Kuwait at 1.2 per cent.

Total value traded in the GCC equity markets declined by 20.7 per cent to $55.7 billion as compared to $70.2bn during December 2014.

The average monthly value traded during 2014 reached $66.4bn.

The share of Saudi Arabia’s market (Tadawul) increased slightly from 77 per cent to 78 per cent of total value traded in the GCC during the month, after a decline in the UAE market’s share from 12 per cent in December 2014 to ten per cent in January 2015.

On the economic front, the drop in oil prices prompted the International Monetary Fund (IMF) to cut growth rate estimates for the GCC economies by one percentage point to 3.4 per cent for 2015, although the agency highlighted that healthy financial buffers would help to provide the necessary cushion to absorb the impact of deficits in government budgets.

GCC’s oil export earnings are expected to fall by $300bn. This was also highlighted when Saudi Arabia, Kuwait and Oman predicted budget deficits for the next fiscal year whereas Dubai presented a balanced budget, states the report citing IMF.