Markets await Saudi budget; higher rates may dampen Egypt
United Arab Emirates stock markets

DUBAI: Gulf stock markets may see minimal buying interest on Sunday as they await Monday’s announcement of the Saudi Arabian state budget, while Egypt may face selling pressure after the central bank hiked interest rates.

Spending cuts and possibly new revenue measures are expected in the Saudi budget and until investors know the extent of them, markets around the region look likely to be cautious.

“Saudi Arabia’s eagerly awaited 2016 budget is likely to influence investor behaviour,” said Sachin Mohindra, portfolio manager at Abu-Dhabi based Invest AD.

Among individual stocks, National Shipping Co of Saudi Arabia (Bahri) may attract interest after it proposed to more than double its annual cash dividend for 2015 to 2.5 riyals – though a higher dividend had been anticipated after Bahri’s earnings rose sharply.

National Commercial Bank recommended paying a cash dividend of 0.75 riyal for the second half of 2015, up from 0.65 riyal in the second half of last year. But Yanbu National Petrochemical Co proposed cutting its second-half cash dividend to 1 riyal from 1.5 riyals.

Meanwhile, Egypt’s monetary policy committee raised key interest rates by 50 basis points on Thursday, citing inflationary pressures.

The hike was a surprise to some investors and may add to concern about shaky economic growth. It will help to support the Egyptian pound, but many analysts think the pound is overvalued and will still have to be devalued at some stage.

“You might find investors parking their cash and earning a higher yield on deposits, but then you might also see companies cutting back on capital expenditure because of those higher lending rates,” said a Cairo-based portfolio manager.

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