Global equity markets remained largely unperturbed.

Global Equities

Global equity markets remained largely unperturbed as investors preferred to be in a wait and watch mode. The negative fall-out over North Korea was largely offset by a relatively quick agreement in the US on extending the debt ceiling. The MSCI World index closed flat amid mixed performance of its sub-indices. The MSCI EM index closed flat, the MSCI G7 index dropped -0.1% 5d while the MSCI Arabian Markets index gained +0.8% 5d. Volatility did increase across the board with the VIX index and the V2X index adding +14.5% 5d and +3.3% 5d respectively. The CBOE EM ETF Volatility index added +7.6% 5d.

While most of the focus will remain on the progress of Hurricane Irma in the US, investors will also watch out for economic data releases in the US and the Bank of England meeting in the UK. Regionally, the markets should see enhanced participation from investors following the end of what appeared to be a fairly lengthy summer.

MENA Markets

It was a truncated week of trading for most regional markets as they reopened gradually after Eid holidays. Volumes continued to remain sluggish. The S&P Pan Arab Composite index gained +0.8% 5d.

UAE bourses closed mixed with the DFM index adding +0.2% wow and the ADX index losing -0.3% wow. Dana Gas was the notable performer as the stock gained +28.1% wow following the announcement that Pearl Petroleum has reached a USD 1bn agreement with Kurdistan Regional Government of Iraq. According to comments from the company’s CEO, Pearl Petroleum shareholders will get USD 600mn of the USD 1bn settlement amount and the remaining will be used to fund projects at gas fields. Dana Gas, which has a 35% share in Pearl Petroleum, is expected to get USD 210mn.

Emaar Properties gained +2.2% wow to close at its highest level since December 2014. In an environment dominated by lack of corporate catalysts it is not surprising to see investors’ building position in the stock ahead of the dividend payment sometime in November 2017 from the spinoff of its UAE real estate business.

The Tadawul (+1.4% wow) continues to build on recent gains ahead of the FTSE decision on including the market in the EM index. Banking sector stocks are leading the recent rally with the Tadawul Banking index closing at year to date highs. National Commercial Bank and Samba closed the week with gains of +3.6% and +1.4% respectively.

Elsewhere, the Qatar Exchange (-1.4% wow) continues to suffer from the ongoing political stalemate with other GCC countries. Foreign investors continue to pare their position in Qatari stocks as the index closed at new post-sanction lows. The decline was led by market heavyweights with Qatar National Bank and Industries Qatar losing -2.0% wow and -2.8% wow.

Developed Markets

There were plenty of headlines last week including a nuclear test by North Korea, agreement between the Democrats and the US President Donald Trump to extend the debt ceiling and concerns over the impact of cyclone Irma. However, none of these seemed to have a lasting impact on developed market equities as they remained largely range bound. The S&P 500 index, the Euro Stoxx 600 index and the Topix index declined -0.4% 5d, -0.2% 5d and -1.6% 5d respectively.

Ahead of the German elections in the last week of September 2017, the DAX index has outperformed its regional peers. The index rallied +1.3% 5d compared to a drop of -0.1% in the MSCI G7 index. Having said that, the options market does suggest that notwithstanding the gains, investors do retain a sense of skepticism. The cost of three-month DAX puts versus calls is at its highest level in more than a year.

Emerging Markets

The lingering tensions over North Korea did little to deter investors’ confidence in emerging markets. The broad MSCI Emerging Markets index closed flat while the MSCI BRIC index added +0.2% 5d.

According to data from EPFR, emerging markets had inflows of USD 1.12bn (0.1% of AuM) to bring its accumulated year to date inflows to USD 54.6bn. The inflows were driven mainly by ETFs as mutual funds saw an outflow of USD 210mn.

MENA Equity Indices (wtd % change)

Source: Emirates NBD Research

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