DUBAI: Stock markets in the Gulf may trade narrowly on Monday as long-term investors slowly rebuild positions, while Egypt may edge up as foreigners buy on the view that damage to the economy from a hard currency shortage has temporarily eased.
Brent oil futures have stayed around $40 a barrel since March 9, which has encouraged regional investors to return to Gulf equity markets and buy back stocks offering attractive dividend yields and valuations.
“Long-term investors are returning to the markets, but they remain cautious, deploying funds prudently and selectively,” said a Jeddah-based portfolio manager.
Many foreign investors are still on the sidelines, anticipating a slowdown in economic growth and corporate earnings in the Gulf this year and perhaps in coming years – a slowdown that will occur despite oil’s modest recovery.
“First-quarter results will paint a better picture of how companies have handled this new era of lower oil prices and smaller subsidies,” said the portfolio manager.
The Saudi stock index index, last at 6,369 points, faces major technical resistance at its 100-day average, now at 6,510 points.
The Egyptian pound held steady at an official auction on Sunday but strengthened on the black market. The central bank supplied the market with foreign currency last week and eased restrictions on dollar deposits and withdrawals.
Cairo’s main index lost steam on Sunday, snapping six days of gains as it closed flat, but last week it rallied 7.8 percent, breaking above its February peak – a bullish technical signal.
Foreign investors, who have been largely absent from the market this year, have started in recent days to show more interest in Egyptian shares, and this may continue on Monday, especially as international bourses have begun to recover from the turbulent start to the year.
On Monday morning MSCI’s broadest index of Asia-Pacific shares outside Japan is up 1 percent.