Steadier oil prices could improve the sentiment of investors in Gulf stock markets on Tuesday; Brent crude edged up and held above $48 a barrel in Asian trade after OPEC secretary-general Abdullah al-Badri said oil may have bottomed out and warned of the possibility of a future spike.
Oil prices have been the main factor affecting Gulf equities in the last few months as the commodity’s plunge sparked panic stock market sell-offs. Many analysts think local bourses will begin making sustained gains only after oil stabilises.
Investors’ main concern so far has been that governments in the Gulf will cut spending in line with falling revenues. However, Saudi Arabia and Dubai have already published 2015 budgets with no significant cuts.
On Monday, Kuwait’s finance ministry revealed a draft budget for the year starting in April, which projects a big deficit and a 17.8 per cent drop in spending from the original plan for the current 2014/15 year.
However, Kuwait’s budget plans are only very rough guides to reality, so its projections do not necessarily mean actual state spending will fall sharply.
In recent years, political disputes and bureaucracy have frequently caused actual spending to run far behind planned spending. In the first six months of the current fiscal year, for example, actual public spending was 6.12 billion dinars, below 11.61 billion dinars originally planned for the period.
So, if the government implements most of next year’s budget plan, actual spending may equal or even exceed this year’s actual spending, avoiding a hit to economic growth.
In Dubai, builder Arabtec Holding may gain after its main shareholder, Abu Dhabi fund Aabar Investments, received regulatory approval to buy a further 100 million shares. It is not clear from whom the shares will be bought.
Masraf Al Rayan, Qatar’s second-largest bank by market value, may attract buyers after reporting a 21.2 per cent rise in fourth-quarter net profit on Monday.
The lender's net profit for the three months to December 31 was 548 million riyals ($150.5 million), according to Reuters calculations. Three analysts polled by Reuters had on average forecast a profit of 535.1 million riyals.
In the telecommunications sector, brokerage NBK Capital on Monday upgraded Dubai’s du to “buy’’, citing strong earnings performance, and downgraded Qatar’s Ooredoo to hold because of increasing competition faced by its foreign units and political instability in Iraq.