Abu Dhabi: The GCC’s equity markets rallied on Thursday just hours after the US Federal Reserve announced the much-anticipated hike in interest rates, with the Dubai Financial Market (DFM) leading the way in gains.
The DFM index rose 2.92 per cent to reach 3,073.07, having been trading below the 3,000 level for the past week. Almost all the market’s powerhouses also saw a jump in share prices.
Meanwhile, the Abu Dhabi Securities Exchange (ADX) general index was up 2.05 per cent to reach 4,148, as Qatar’s QE index edged up 0.52 per cent to end the day’s trade at 9.912.92.
Saudi Arabia’s Tadawul also gained 2.61 per cent to end the day at 7,045.68, having hardly been able to reach the 7,000 level in the past few sessions.
On Wednesday evening, the Federal Reserve hiked interest rates by 25 basis points to between 0.25 per cent and 0.50 per cent, signalling faith that the US economy had overcome the 2008 financial crisis. The hike is the first of its kind in the past nine years.
Despite the rally, which extended to global markets, analysts said that it was merely corrections after the strong sell-off last week during which the DFM index shed over 10 per cent.
The sell-off followed a chaotic Opec (Organisation of Petroleum Exporting Countries) meeting that saw oil price plummeting to around $36.
Analyst Osama Al Ashry said that the markets were still trading in high-risk areas, and expected to see new lows.
“The market has been reaching new lows almost every week lately, so I believe these corrections are only temporary. I think the DFM index could reach 3,180, and a maximum resistance level of 3,270 before falling again. In late July, the index was at 4,234, and shed about 25 per cent in the four months that followed. The current corrections raise the index only about six per cent, so the overall result is still negative,” he said.
Al Ashry, a member of UK organisation, Society of Technical Analysts, said that it there was a strong possibility for the DFM index to reach its support level of 2,524 in the first quarter of 2016.
“Even though investors can make quick profits on the short-term, the outlook for the medium- and long-term is negative, so I wouldn’t be optimistic at this point, and I don’t think brokers should use this rally to take high-risk deals.
The ADX index can still easily drop even if it reaches its resistance level of 4,280. Technically, it has a target of 3,572 in the first quarter of 2016,” the analyst said.
On DFM, share prices surged, with Arabtec jumping 9.44 per cent, Amlak rising 9.09 per cent, and Dubai Islamic Bank gaining 4.64 per cent. Emaar was up 3.8 per cent, Gulf Finance House grew 4.49 per cent, and Dubai Parks ended 2.65 per cent higher.
In the capital, Abu Dhabi National Energy Company (Taqa) topped the gainers’ list with a 9.52 per cent increase, followed by Abu Dhabi National Hotels with eight per cent, Arkan Building Materials with 6.82 per cent, Abu Dhabi Ship Building with 5.4 per cent, and First Gulf Bank with 4.7 per cent.
Of the 34 stocks traded on DFM, 27 went up, six went down, and one remained unchanged. Of the 27 stocks traded on ADX, 18 advanced, five declined, and four remained flat.
Saudi’s Tadawul to drop in Q1 2016
Saudi Arabia’s Tadawul index is expected to drop below 6,500 in the first quarter of 2016, with the market still remaining a high-risk one, according to technical analyst, Osama Al Ashry.
On Thursday, the index rose 2.61 per cent to reach 7,045.68 amid a regional rally.
“When Brent crude prices bounce back, it will be a strong rally, but until then, I expect the Tadawul index, and indeed, the overall GCC equity markets to keep dropping. The main challenge with markets now is the lack of investors, and hence, low liquidity. I think we will see stronger liquidity by the end of 2016, so I’m not optimistic until then,” Osama Al Ashry, a member of UK organisation, Society of Technical Analysts, said.
He added that he expected 2016 to see Brent crude prices above the $50 mark.