Greece, MSCI upgrade to impact market
Shrinking profit margin for oil producers also a factor
Whether Greece remains a member state of the eurozone, after it elects a new government on June 17, as well as a possible upgrade by MSCI of the UAE and Qatar to emerging markets status, will likely be the major factors in determining regional stocks performance this month, say analysts.
“The regional markets are likely to be in the neutral to positive territory in June rather than be in negative territory as they have already corrected before the summer. In June, we will know whether MSCI upgrades UAE and Qatar from their current frontier markets status. The upgrade would be a catalyst for the regional markets,” Musa Haddad, Head Trader with National Bank of Abu Dhabi Asset Management told Gulf News.
“The regional markets have been holding back some upside moves because of the Greece issue. Clarity on Greece would enable the markets resume their upside moves, which until then is expected to move sideways,” he added.
Haddad said if Dubai’s benchmark index manages to hold above 1,450, “there’s nothing to worry about.” With regard to the Abu Dhabi market, he said it has a strong support level at 2,450 and a break above 2,550 could be the beginning of a market rally. For the Qatar market, 8550 is a critical level that would trigger bullish sentiments, said Haddad. He added that for Saudi Arabia, 6,900 will be an important level for its market.
A Dubai-based stock trader told Gulf News the profit margin for major oil producers in the region is shrinking following a recent decline in international oil prices due to economic growth concerns in the U.S., China and Europe.
“A further fall in oil prices in the coming days may increase the selling pressure on the region’s markets in June. There’s no escaping the regional markets’ co-relation with the international developments,” said the trader.
He said the “language from Germany” in how it wants to deal with Greece’s debt situation will be critical to the direction global bourses take in June.
The international markets in recent weeks have been spooked by the spectre of a default by Greece on its sovereign debt obligations, which may encourage others to follow. The cost of Greece’s exit from the Euro area has been conservatively estimated at $1.25 trillion by market experts, a figure high enough to push the global economy back into recession.
“If the news from Europe is positive, we might see a return of investors in high risk assets. It’s all sentiment-driven,” Haddad said.
