Markets: Regional stocks

The three months August to October were a very volatile period for global markets. Within that time, gold touched historic highs, benchmark equity indices dipped to yearly losses, currency markets fluctuated intensely, and oil prices eased amid growth concerns. But it was news from the Euro zone that continued to rule market trends.

Global overview

Global stocks initially were subdued on the back of weak US and European economic news. Risk appetite rejuvenated after the US Federal Reserve (Fed) decided to continue the low interest rate regime until mid-2013, US retail sales picked up and the Japanese economy fared better than expected. Overall uncertainty, however, limited the upside potential, and gold breached $1900 in August.

The indices continued to skid in September as European concerns undercut investor appetite, most clearly upon disagreement over the Greek bailout package, as well as the Swiss National Bank's decision to set a cap for the euro exchange rate, which sent ripples across various investment assets. Investors were also let down by a non-commitment from the Fed to aid the faltering US economy. Temporary gains were brief. Inter alia, the International Monetary Fund (IMF) reduced its global growth forecast.

October trading gave a direct contrast, indices making a sharp comeback as suggestions emerged of a solution to the Euro zone debt crisis, allied to positive signs from the US economy and the global economy's better chances of avoiding another recession. Markets continued to hit minor bumps, but the overall upside momentum was much larger.

The Gulf

Equity indices in the GCC region displayed varied performances during the quarter. The overall global uncertainty kept investor sentiments subdued, but local events induced differentiation among the regional peers. Notably, robust budget expenditure on the back of increased natural gas revenues led to overall optimism in the Qatari economy, helping the local bourse buck the negativity tendency.

Dubai Financial Market

The benchmark DFMGI (general index) lost more than 7 per cent for the second consecutive quarter as subdued investor sentiments weighed on the index. All segments except for industrials ended the three months in negative terrain, led by the services sector sub-index, which lost 31.9 per cent. During August encouraging corporate earnings data from some counters helped limit losses. But in September weak global cues caused sentiment to weaken further. In October's trading session, the main index lost 1.7 per cent, leading to a year-to-date loss of 13.6 per cent.

Abu Dhabi Exchange

The Abu Dhabi Securities Exchange index lost 4.5 per cent during the August to October quarter as continued weakness in global markets kept regional investor sentiments low. The consumer staples, real estate and investment and financial services segments lost 16.8 per cent, 15.8 per cent and 14.9 per cent respectively. The benchmark index contained its losses during August after some companies reported positive quarterly earnings data. But in September the index lost more than 3 per cent. It declined in October as well, upon broad-based selling across sectors, with only banking sector stocks bucking the negativity mildly.

Saudi Stock Exchange

The Saudi Stock Exchange index was down 2.6 per cent during the quarter amid mixed sectoral trends. Eight out of the 15 sub-indices ended the quarter in the green. The decliners were led by building and construction, petrochemicals and real estate indices, which fell 7.2, 5.2 and 5.0 per cent respectively. In August the TASI (index) slipped below the psychological 6000 point mark, a decline caused by global growth concerns, which inter alia put a lid on the oil price outlook. In September a pick-up in insurance stocks propped up the main index, and the trend continued into October. On a year-to-date basis, the TASI was down 6.0 per cent for the period.

Kuwait Stock Market

Kuwait's was the second-best performing index among GCC peers during the August to October quarter. It eased 1.8 per cent as three out of the eight segments closed in the green. The food and industrial sector indices gained 4.6 per cent and 1.0 per cent respectively, while services and insurance weighed the most with 4.0 and 2.9 per cent losses. August trading was afflicted by the domestic economic and political instability, but, despite the tensions continuing, in September the benchmark index eked out a monthly gain on the back of encouraging quarterly corporate earnings data. In October most sectoral indices traded in positive territory, except for insurance and banking, which lost more than 2.5 per cent each.

Qatar Stock Market

The Qatari benchmark index was the sole gainer among the regional peers during the August to October quarter. It gained 2.4 per cent, as the 12.9 per cent and 6.7 per cent gains in the insurance and banking & financial sector indices overshadowed the 19.4 and 1.9 per cent dips in industrials and services. Still, on the year-to-date basis the benchmark index was down 1 per cent. In August foreign investor institutions bought local equities, but the overcast global conditions curbed gains. Optimism prevailed still in September on the back of encouraging half-year earnings reports and continued foreign support. In October all the sub-indices gained except the insurance sector index, which dipped 2.9 per cent.

Muscat Stock Market

During the quarter Oman's benchmark MSM30 index lost 3.8 per cent, dragged down by all segments: industries off by 10.5 per cent, banks & investment by 2.3 per cent, and the services & insurance index by 0.7 per cent. Year-to-date the index lost 17.3 per cent, second only to the Bahraini bourse's slide. Across-the-board selling dragged the main index lower in August, but like its regional peers, the losses were pared after the quarterly earnings releases. In September the exchange witnessed the Omani riyal 24.7 m IPO of SMN Power. In October the index lost a fraction, weighed by industrials, while the services & insurance sector index landed in the green, with a gain of 1.4 per cent.

Bahrain Stock Exchange

The Bahrain All Share Index was the topmost loser among GCC indices, losing 11.2 per cent in the quarter. The industrial segment lost more than 46 per cent. Other major decliners were the investment and services sector indices, which fell 5.4 and 4.9 per cent respectively. The benchmark index slid in August on the back of broad-based selling, but September saw the index dipping more than 7 per cent owing to the industrial sector's severe gravitational force, relating primarily to a fall in share price of Aluminium Bahrain, as investors worried a planned gas price hike might negatively impact the company's earnings. That softening trend continued into October.

The writer is General Manager, Dun & Bradstreet South Asia Middle East Ltd