Gulf Stocks Retreat as Emerging Markets Prepare for Fed, MSCI

  • DFM General Index falls most in a week in low volumes
  • Most GCC gauges fall as traders ready for Fed, MSCI, Brexit

Dubai stocks led a retreat across most Gulf Arab equities, tracking declines in emerging markets as investors brace for a series of key global events including this week’s Federal Reserve meeting and MSCI Inc.’s annual market-classification review.

The DFM General Index retreated 1 percent, the steepest drop since June 2. Emaar Properties PJSC, the developer with the largest weighting on the benchmark index, was the biggest contributor to the gauge’s loss. Traders exchanged 110 million shares, about 40 percent less than the 20-day average. Abu Dhabi’s ADX General Index fell a second day, losing 0.3 percent.

“Global markets are feeling the heat of uncertainty,” said Talal Touqan, head of research at Abu Dhabi-based Al Ramz Capital LLC. “The United Arab Emirates’ stock markets are not immune to changing sentiments, at least not in the short run. MSCI’s reclassifications, Brexit, and the Fed’s meeting represent this month’s main events.”

MSCI will this week decide whether to include Chinese mainland shares, so-called A shares, in its international indexes, heralding a potential shake up in its developing nations’ gauge. Against that backdrop, the U.K. will vote on its future in Europe this month, and Fed officials will meet to decide on interest rates. An increase in U.S. borrowing costs may spark a selloff across emerging-market assets.

Saudi Dip

Dubai’s gauge fell to 3,336.10 after finishing above 3,370 on Thursday for the first time in more than a month. The measure hasn’t closed above its 50-day moving average since May 2, according to data compiled by Bloomberg.

“The psychological barrier remains around 3370,” said Touqan. “It has been tested a few times so far, and traders turn bearish around it.”

Property companies led the slump. Alongside Emaar’s 2 percent slide, DAMAC Properties Dubai Co., Arabtec Holding Co., Dubai Parks & Resorts PJSC and Union Properties PJSC were among the largest contributors to the retreat. Dubai’s Real Estate and Construction Index decreased 1.6 percent, the first drop in four days.

Qatar’s QE Index fell 0.4 percent as trading volume plummeted to less than half the 20-day average. Qatar National Bank dropped 1.4 percent after the lender said it raised 10 billion riyals ($2.7 billion) via Tier 1 perpetual capital notes.

Oman’s MSM 30 Index slipped 0.3 percent. Saudi Arabia’s Tadawul All Share Index retreated for the first time in five days, losing 0.6 percent. Bahrain’s BB All Share Index gave up earlier gains to finish 0.3 percent lower. Kuwait’s SE Price Index gained a fifth day, climbing 0.2 percent in the longest rising streak since August.

Egypt Deal

Egyptian stocks slumped the most in more than three weeks after the collapse of billionaire Naguib Sawiris’s bid to buy CI Capital, the investment banking arm of Commercial International Bank Egypt. The EGX 30 Index dropped 1.4 percent, the most since May 19.

CIB and Beltone, a unit of Sawiris’s main investment vehicle Orascom Telecom Media & Technology, announced Thursday that they will no longer pursue the transaction due to the latter’s inability to obtain regulatory approval. Egypt’s markets regulator has held-off giving its go-ahead for months in what Sawiris said was an example of political scores being settled against him. Buying CI Capital was a part of his plan to create one of the country’s biggest financial companies, he said in an interview in March.

“The failed CI Capital deal is creating the biggest drag on the market,” said Hesham Wafa, a Cairo-based institutional sales trader at Mubasher Trade. “It casts a shadow on the investment scene in Egypt as a whole.”

Orascom Telecom plunged 5.7 percent, the most since January, on more than double its average volume over the past 20 days. CIB lost 2.4 percent.

EFG-Hermes rose 1.9 percent after its board recommended distributing 40 percent of proceeds from the sale of its stake in Credit Libanais to shareholders. The stock has been one of the best performers on the main index over the past month, jumping 21 percent over the period.

Markets in Israel were closed for a public holiday.

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