As quickly as this 12 months started, the Gulf’s inventory markets began driving a brand new momentum and collectively lifting the fortunes of listed firms. A 12 months in the past – and particularly after the outbreak of COVID-19 – these markets had been by sharp declines, particularly after key sectors have been dropped at a standstill, and compounded by a scarcity of liquidity from the drop in oil costs.
The efficiency of listed firms have been significantly affected, particularly in banking sector and which continues to be affected by the rise in dangerous/uncertain debt exposures. And now, given how markets are performing, the indications are that almost all of those unfavourable elements are starting to dim. With vaccination campaigns kicking off throughout the globe, it seems like financial actions are able to get again to regular ranges.
Velocity up jabs
Issues are anticipated to get even higher as GCC international locations wrap up their efforts to manage the vaccines to as many as is feasible. They’re now among the many world’s high international locations in per capita vaccinations, which is now at greater than 20 per cent. That is continuously rising, which means that greater than half of the inhabitants will get vaccinated within the second quarter of 2021.
The Gulf international locations have introduced their newest budgets, and which give ample proof of better help to numerous sectors in addition to optimum ranges of public spending, one thing that’s very important within the present financial state of affairs. Spending charges are anticipated to rise, one thing which is able to rub off positively on listed firms.
Oil costs too have risen and present sufficient indicators of additional enhancements. In its newest report, OPEC indicated that demand will surge to 94 million barrels per day within the first quarter, which is near pre-COVID-19 demand ranges (at 100 million barrels per day). And if we take a look at the scale of the output cuts introduced by OPEC+ – at 7 million barrels per day – along with Saudi Arabia’s voluntary discount (by a million barrels per day), provide shortages might happen, which might result in additional worth positive aspects.
The steep decline in inventory costs of many firms – significantly of banks – over the previous 12 months represent an extra temptation for buyers. At present costs, the returns for a lot of listed firms exceed 4 per cent, which is far greater than prevailing rates of interest of near zero. It’s also greater than yields on actual property in some Gulf cities.
This has fed the rise in buying and selling volumes, each when it comes to amount and worth in comparison with ranges in January 2020. Such positive aspects vary between 5-20 per cent, and led by Dubai Monetary Market. The index, by the way, had the best fee of decline in a 12 months. But, the approaching weeks might see some sharp fluctuations as firms announce their 2020 outcomes, together with many who present sharp declines, particularly for banks.
This is because of uncertain money owed and huge provisions taken to compensate for them, which might result in outsized fluctuations for these shares. Nevertheless, the final indicators seem like constructive for medium- and long-term buyers, beginning with the outcomes from the primary quarter of 2021.
Because of this buyers mustn’t run after speculations to keep away from losses and concentrate on firms recognized for monetary stability and dividends. There are lots of such viable investments within the Gulf’s inventory markets.
– Mohammed Al Asoomi is a specialist in vitality and Gulf financial affairs