DUBAI: Stock markets in the Gulf may firm on Tuesday as investors could be encouraged to enter longer-term positions with further evidence that oil prices may have bottomed. Egypt may be supported by positive earnings from Telecom Egypt.
Brent crude futures are holding above $40 per barrel in early Asian trade, although they are slightly down from their overnight high of $41.04.
Many regional fund managers believe Gulf stock markets could still be pressured this year by further squeezes in corporate earnings as governments continue to tighten fiscal policy.
But as rising trading volumes in recent days show, for now investors are focusing on the idea that the worst is over for oil prices.
Technicals are positive; the Saudi index, last at 6,387 points, has no significant resistance before the 100-day average, now at 6,567 points; a return to the average, last hit in July 2015, looks reasonable given the change in market sentiment.
The Dubai index, last at 3,381 points, faces no significant chart barrier before the 3,500-point area, which acted as support last September and resistance in November, and which roughly coincides with the 200-day average.
Telecom Egypt may gain after the state-owned landline monopoly reported on Monday a 111 percent jump in 2015 net profit after corporate tax changes. Net profit rose to 2.999 billion Egyptian pounds ($383 million) from 1.419 billion pounds. Shares in the operator were up 1.8 percent on Monday at 6.78 pounds in an initial reaction to the news. According to analysts polled by Thomson Reuters, the company is undervalued with a mean target price of 10.73 pounds.
But Egypt’s market, which is up for three sessions in a row, remains worried by speculation about a possible currency devaluation. Traesury bond yields rose sharply at an auction on Monday as a result.