Regional bourses remain jittery over continuing US debt impasse

Abu Dhabi: The region's markets are awaiting with bated breath the outcome of US debt ceiling talks, say market experts.

They say that unless progress is made in raising the country's $14.3-trillion debt ceiling before August 2, volatility in markets across the Gulf — and internationally — is set to continue.

"All markets, international as well as regional are expecting the US lawmakers to reach an agreement by the deadline. In case no agreement is reached, further downsides in the regional markets are expected," Marwan Shrurrab, vice-president with Dubai-based GulfMena Investments, a firm that manages assets of about $80 million (Dh293.6 million), told Gulf News.

"The market in Saudi Arabia is down by 1 per cent today on fears of a US debt deal not being reached next week. In the event of there being no deal, the risk appetite of international and regional investors will be reduced towards the regional stocks which would cause further selling pressure on equities and other instruments which are viewed as risky assets," Shurrab said.

Last week, the UAE markets reacted negatively to the standoff in the US, which threatens to throw the world back into recession. The Dubai Financial market index ended on Thursday 0.09 per cent lower at 1,506.13, while the Abu Dhabi Securities Exchange general index was down 0.51 per cent to 2,627.99.

If the US lawmakers fail to raise the ceiling by Tuesday, the Treasury Department has said it will no longer be able to guarantee that it can pay all the country's bills in full and on time.

That's because Treasury will not be taking in enough revenue to cover all the bills due in August. And without a debt ceiling increase, it will be prohibited from borrowing new money in the bond market to make up the difference.

"It will not be lost on investors that the US politicians raised a considerable risk of the US going into technical default," wrote Gary Dugan, Chief Investment Officer — Private Banking at Emirates NBD in a research note.