Aditya Pugalia - Director, Financial Markets Research
Published Date: 10 June 2018
Global equities closed higher buoyed by strong economic data from the US and reduced political risk in the Eurozone. GCC equities also closed higher on the back of fresh stimulatory measures by Dubai and Abu Dhabi. While the broader emerging markets index closed higher, there were pockets of sharp sell-off in certain emerging markets, notably in Brazil and Turkey. The MSCI World index added +1.4% 5d on the back of +1.5% 5d gains in the MSCI G7 index and +0.5% 5d gain in the MSCI EM index. The MSCI Arabian Markets index added +0.4% 5d.
The focus this week will firmly be on central banks with meetings of the Federal Reserve, Bank of Japan and European Central Bank scheduled. Investors will also be keeping an eye on the Donald Trump and Kim Jong Un meeting later this week. The repercussions of the failed G7 meeting over the weekend will also be felt on the financial markets.
In the US, technology stocks have outperformed broader equity indices. This is reflected in +10.8% ytd gain for the Nasdaq index compared to +3.9% ytd gain for the S&P 500 index. It is also interesting to note that the market capitalization of Nasdaq index relative to that of S&P 500 index is now higher than that at the end of 2000s.
Source: Bloomberg, Emirates NBD Research
Most MENA equity indices closed higher as a combination of inflows related to the re-balancing trade and announcements of stimulatory measures helped boost retail investor sentiment. The S&P Pan Arab Composite index added +2.0% 5d.
UAE bourses closed higher with the DFM index and the ADX index adding +1.9% 5d and +2.6% 5d. During this week both Abu Dhabi and Dubai unveiled fresh measures to boost the economy. Abu Dhabi announced plans to spend as much as USD 13.6bn over the next three years to stimulate the economy and also take measures to allow free zone companies to take part in government tenders. Dubai’s Executive Council also approved a number of measures to boost growth and attract investment, including reducing municipal taxes on businesses; waiving some fees on the aviation industry and fines on late property registration; and freezing private school fees for the coming academic year. Emaar Properties (+6.5% 5d), Arabtec (+12.8% 5d) and Aldar Properties (+2.4% 5d) were notable gainers.
The Qatar Exchange outperformed with gains of +4.1% 5d. The rally was led by stocks impacted by the MSCI’s decision to increase weights in its emerging market index. Qatar National Bank added +3.4% 5d, Qatar Islamic Bank gained +7.0% 5d and Industries Qatar rallied +6.2% 5d.
In an interesting development, the Qatar Financial Markets Authority plans to split the nominal value of all listed companies to QAR 1 per share. The decision is driven by the aim to widen the investor base and increase liquidity. This would effectively imply a 10-for-1 stock split for all Qatari stocks. However, the statement did not mention details or timeline for the implementation of the same.
The Tadawul (+2.3% 5d) closed higher for a fourth consecutive week to take its year to date gains to +14.7%. Interestingly, in a departure from the recent trend, the small caps also participated in the rally. The S&P Saudi Arabia Small Cap index added +1.1% to close in positive territory for the first time in six weeks. The Public Investment Fund increased its stake in Maaden from 50.0% to 65.44%. The stock closed flat last week.
Developed market equities closed mixed as the week was dominated by economic data, trade talks and political developments. While strong economic data helped US stocks, European equities were pulled lower by a weak data releases and concern over the policy program of the new Italian government. The S&P 500 index, the Euro Stoxx 600 index and the Nikkei index ended the week +1.6% 5d, -0.5% 5d and +2.4% 5d respectively.
Emerging market equities underperformed wider equity markets. The MSCI EM index added +0.5% 5d compared to a gain of +1.4% 5d in the MSCI World index. Turkey’s Istanbul 100 index dropped -3.3% 5d amid mixed developments. The decision of the Central Bank of Turkey to raise interest rates by 125 bps was offset by Moody’s decision to downgrade 17 Turkish banks and put them on review for further downgrade.
GCC Equity Flow Monitor - June 2018
Trump throws spanner into UK Brexit debate