Gulf shares rebound from steep declines as sentiment improves

Dubai: Gulf shares rebounded from some of the steepest declines on record, after the US Federal Reserve cut interest rates and regional central banks followed suit. Dubai's benchmark equities index surged.

"The Fed's decisive move was the primary catalyst bringing investors back into equities," said Kamran Butt, Dubai-based head of Middle East equity research at Credit Suisse Group. "The selloff was overdone regionally because economies here are robust with very strong growth rates."

The Dubai Financial Market General Index soared 10 per cent to 5,755.21, its biggest one-day gain. The Abu Dhabi Securities Market Index surged 6.3 per cent and Saudi Arabia's Tadawul All Share Index closed 0.2 per cent up after jumping as much as 8.2 per cent.

Most Gulf Arab countries followed the US Federal Reserve's interest-rate policy to maintain their currency pegs to the dollar.

Saudi Arabia cut the reverse repurchase rate by half a percentage point, while the UAE reduced the repo rate by three-quarters of a point. Kuwait lowered its benchmark lending cost to prevent the dinar from appreciating. Bahrain and Qatar cut their deposit rates by half a point.

The Saudi market, the largest in the Arab world, started the day up six per cent but ended trading up just 22 points, a meagre 0.23 per cent, at 9,360.44.

It was weighed down by market leaders, petrochemicals giant Sabic and a number of major banks, which initially rose sharply but ended in the red.

At the end of the week yesterday, the Tadawul All-Shares Index had lost 18.9 per cent and it is now down 16.2 per cent on last year's close of 11,175.96.

The market is estimated to have lost more than $60 billion of its capitalisation this week to around $435 billion.

The Saudi market has been reeling under lower-than-expected profits of listed firms that have announced their results.

All benchmarks rise

All seven of the benchmarks in Gulf markets tracked by Bloomberg News advanced yesterday.

Qatar's Doha Securities Market closed up 4.2 per cent at 9,533.27 points after sliding 7.76 per cent on Tuesday. It is still slightly below last year's close of 9,580.45.

The tiny Muscat Securities Market increased 2.8 per cent to close above the 9,000-point mark at 9,170.38.

On Tuesday, it dropped 8.33 per cent.

Kuwait and Bahrain stock markets, which remained unaffected by Tuesday's drop, recorded only slight increases. Kuwait Stock Exchange index rose 0.9 per cent to 13,239.10, while the Bahrain stock market increased 0.64 per cent to close on 2,811.33 points.

"I think the markets could move up tomorrow a little more," Amro Diab, head of Gulf institutional sales at EFG-Hermes Holding said. "There is still a lot of value in most of the stocks."