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Increasing oil prices revive Gulf markets despite geopolitical situation

Concerns over the ongoing situation in Yemen and the strike in Libya, which forced the closure of the El Feel oil field, have also eased supply

MENA markets in general witnessed a positive month in April, despite the fact that the geopolitical situation in the Middle East is getting more complicated, says a report.

The Kuwait Financial Centre (Markaz) states in its monthly report that the revitalisation of MENA markets was driven by the increase in Brent crude by 21.2 per cent.

Dubai market indices rose by 20.3 per cent and the Saudi Tadawul indices rose by 12 per cent, achieving the maximum gains.

On the contrary, the Egyptian market indices fell by 4.9 per cent, while the indices of Bahrain fell by 4.1 per cent and Morocco by 3.2 per cent, ending the month in red. The S&P GCC index closed the month at 127 points, recording a 10.1 per cent increase in April.

The report adds that the Kuwaiti market indices rose slightly during April, underpinned by the rise in oil price, after the Capital Markets Authority (CMA) announced plan changes to bring market practices in line with international standards.

The price of Brent crude jumped by 21 per cent in April, to achieve the best monthly gain in 6 years, aided by a weakening dollar and sentiment regarding easing of the supply glut.

Concerns over the ongoing situation in Yemen and the strike in Libya, which forced the closure of the El Feel oil field, have also eased supply, says the reports.

However, the report adds, the talks between world powers and Iran about restricting work on the deal’s nuclear programme in exchange for an easing of sanctions imposed, are approaching the final stages.

The easing of sanctions may lead to an increase in the amount of supply in the market, which could push prices downward.

The Markaz report points out that the Dubai Financial Market General Index (DFMGI) was revitalised in April by the positive profits made by companies as well as high oil prices.

The index broke the 4,200-point barrier, touching 4229 points for the year. The Saudi market rose on the back of high oil prices, despite the increase in production and King Salman’s reshuffle of the lines of succession and the cabinet.

Egypt’s stock market was affected by the introduction of taxes on capital gains and dividends, although hopes of amendments to new tax laws remain, says the report.

On the other hand, the volume of shares traded rose during the past month of April by 66 per cent. However, the value of shares traded has increased slightly by 0.2 per cent in most of the region’s markets.

The volume traded in Abu Dhabi, Dubai and Bahrain increased by more than 150 per cent.

The Dubai market rose nearly 160 per cent in volume traded.

In terms of valuation, Price-Earnings ratios of Oman, Bahrain and Abu Dhabi markets are lower, at less than 11 times. With the possibility of an increase in the supply of oil from Iran, it remains to be seen if OPEC members will continue to hold firm with their current strategy, says the report.

Regulatory changes in the region

In a bid to improve the country’s standing in the Doing Business rankings issued by the World Bank, the UAE’s Securities and Commodities Authority (SCA) had issued new laws to protect small shareholders and to make the trading process more transparent, including regulations covering halts to trading in companies’ shares.

In the last edition of Doing Business, the UAE was ranked 22nd in the world, the highest in the GCC, but was ranked only 43rd in terms of protecting small investors, adds the report.

On the other hand, Kuwait’s Capital Markets Authority has sought to make its practices compatible with international standards, pursuing the goal of improving the investment environment in the country and raising its classification to emerging market.

The new plans will separate the settlement of trades from its central depository and make the time allowed for the transfer of securities the same for all investors, says the report.

Saudi Arabia will open its $530 billion stock market to foreign investments on June 15, an eagerly awaited move that will give international investors direct access to the Middle East’s biggest economy.