Saudi bourse leads GCC stock rally

Muscat: The GCC stock market’s winning streak continues, with April 2018 marking another positive month, according to the Kuwait Financial Centre’s (Markaz) recently released Monthly Markets Review report.
The report said the S&P GCC Index was up by nearly 3 per cent for the month and was now up by nearly 10 per cent for the year, making it one of the best performing regions in the world. Contrastingly, the Boursa Kuwait main index ended the month lower by 1.8 per cent. Both the MSCI world index and the MSCI Emerging market index were flat for the year. The Gulf Cooperation Council (GCC) performance is largely attributed to the strong Saudi rally that saw its Tadawul index climb by 14 per cent for the year.
The report added that the expectation of Saudi being included in the MSCI and FTSE index along with the much-awaited Saudi Aramco initial public offering (IPO) was fuelling this rally. Qatar reversed its long streak of poor performance by rallying strongly in April 2018. The Qatar index was up by 6 per cent for the month and 7 per cent for the year.
This is clearly an oil price-led rally. The price is now hovering around $75 per barrel on the back of strong Organisation of Petroleum Exporting Countries (OPEC) compliance and very strong demand from all over the world. The oil price rise has not led to a let-up in bond issuances. Sovereign issuances continue, as we witnessed two mega offerings from Saudi Arabia and Qatar to the tune of $12 billion each. Saudi Arabia has now started listing local bonds on the Tadawul exchange to provide liquidity to bond trading, which is a great step, given the volume of issuances every year.
Mena market trends
The Markaz report said corporate earnings for 2017 increased by 16 per cent on the back of a strong banking sector that witnessed a growth of nine per cent. Major GCC banks including Al Rajhi, NBK, Emirates NBD and QNB delivered good results. The Markaz report expects corporate earnings to rise by four per cent in 2018.
International Monetary Fund (IMF) growth forecasts were heartening. While global growth was pegged at 3.9 per cent, the Mena region was expected to clock 3.7 per cent, the report said.
With the stakes getting higher in the oil market, analysts believe demand will soon outstrip supply with a forecast requirement of 100 million barrels per day this year. This has pushed up oil prices by 13 per cent year-to-date (YTD), with Brent Oil selling at a little more than $70 per barrel. While this would benefit the OPEC countries (Saudi Arabia wants the prices to climb to the range of $80-$100), United States (US) president Donald Trump cried foul over the “artificial high prices”.
Current international issues such as the US pulling out of the Iran nuclear deal and imposing sanctions, oil output falling from Venezuela (OPEC’s largest producer in Latin America) and US sanctions on Russia (another big producer) were helping the price increase by decreasing supply and raising fears of political imbalance. But the US and Iran were not likely to be that affected as a surging US shale oil production could potentially outweigh OPEC’s efforts to end a supply glut and Iran could look to other markets for its oil, the Markaz report said.