Dubai: A majority of Gulf benchmark stock indices rose on Thursday after shares across sectors increased as investors realised that any intervention in Syria might not have much of an impact on the ongoing economic recovery of the countries and in fact may lead to a big spike in oil prices that would add to their revenues.
In fact in case of a conflict in the region, the possibility of capital flight to the Gulf countries is almost a certainty and the more open economies of UAE and Qatar may once again be seen as safe haven boosting their real estate and banking sectors.
Gulf states have strengthened their finances and made contingency plans since a dispute over Iran’s nuclear programme flared up three years ago.
“Our markets have seen a lot of political events and weathered storms like the Arab Spring, Tunisia, Egypt, the power succession in Saudi Arabia — this is not new,” Amer Khan, fund manager at Shuaa Asset Management in Dubai, told Reuters.
The DFM General Index was up 0.26 per cent to close at 2523.13 in a week that saw a two-day plunge of 8.30 per cent. Of the 28 stocks traded in Dubai, 15 advanced, nine slipped and four remained unchanged. Arabtec, which is the region’s biggest public listed construction company, dropped 1.72 per cent. Emaar Properties climbed 0.88 per cent, Drake & Scull was up 0.94 per cent, Union Properties jumped 3.29 per cent and Deyaar Development closed 2.13 per cent higher. Tamweel and Du were the other major gainers, adding 5.36 and 2.24 per cent respectively.
Abu Dhabi’s shares remained flat, down 0.07 per cent to close at 3734.55. Elsewhere in the Gulf, Saudi Arabia added 0.2 per cent, Oman’s MSM Index advanced 0.76 per cent and Qatar QE Index increased 0.75 per cent. Bahrain and Kuwait fell, retreating 0.13 per cent and 0.97 per cent respectively.
Societe Generale estimates that oil prices could surge as high as $150 (Dh550.50) per barrel, from around $115 now, if the Syrian war affects key producers such as Iraq.
Parts of the GCC may also be seen as safe havens if the Syrian war escalates, attracting money and people from countries affected more directly, such as Lebanon, Iraq, Jordan and even Syria itself.
The UAE and Qatar have drawn billions of dollars of capital flight since the Arab Spring uprisings began in 2011.
“I expect UAE and Qatar to continue being safe havens when this is over and one thing that benefits is real estate, equity and physical,” Khan said.
But correction and volatility in the coming days cannot be entirely ruled out.
Although the GCC markets have taken a breather today, we feel that it’s likely that they will pull back further in the short run and worsening of the political situation can be a catalyst in such a scenario said Shakeel Sarwar, head of asset management at Securities and Investment Co, Bahrain.
“Though the increasingly volatile political environment in the Middle-East was on the back of the investors’ minds, the a correction was on the cards as markets such as Dubai and Abu Dhabi had enjoyed a steep increase in 2013. We also believe that the regional consumer stocks’ prices have also rallied ahead of the fundamentals.”
With inputs from Reuters