Most Gulf markets fall as Fed seen hiking rates

BENGALURU: Most stock markets in the Gulf ended lower on Monday, weighed down by expectations the Federal Reserve will increase interest rates, although the Qatari bourse bucked the trend to finish higher.

The Fed is predicted to raise rates by another 25 basis points this week. The US central bank has raised its policy rate by 475 basis points since March last year from the near-zero level to the current 4.75%-5.00% range.

Most Gulf Cooperation Council countries, including Saudi Arabia, the United Arab Emirates and Qatar, have their currencies pegged to the US dollar and follow the Fed’s policy moves closely, exposing the region to a direct impact from monetary tightening in the world’s largest economy.

Saudi Arabia’s benchmark index dropped 0.2%, with Al Rajhi Bank losing 1% and petrochemical maker Saudi Basic Industries Corp retreating 1.8%.

The Saudi stock market saw some price corrections after a strong performance for some time now. The market could also be weighed by mitigated earnings results, said Daniel Takieddine, CEO MENA at BDSwiss.

“Oil prices and the Fed’s interest rates decision could also fuel a more cautious atmosphere this week.”

Crude prices - a key catalyst for the Gulf’s financial markets - fell as concern over the impact of the expected rise in US rates and weaker Chinese manufacturing data outweighed support from OPEC+ supply cuts taking effect this month.

Banking fears have weighed on oil in recent weeks and in what is the third major US institution to fail in two months, United States regulators said on Monday First Republic Bank has been seized and a deal agreed to sell the bank to JPMorgan.

Dubai’s main share index dropped 0.2%, with top lender Emirates NBD retreating 1.1%. In Abu Dhabi, the index concluded 0.9% lower, with First Abu Dhabi Bank (FAB) losing 1.3%.

FAB, the UAE’s biggest lender by assets, on Thursday reported a 23% fall in first-quarter net profit, but said its loans and deposits grew, supported by momentum in the business and commercial environment.

The Qatari index added 0.9%, led by a 2.3% rise in the Gulf’s biggest lender Qatar National Bank.

Outside the Gulf, Egypt’s blue-chip index declined 2%, with Commercial International Bank dropping 1.5%.

According to Takieddine, traders moved to secure their gains while international investors maintain their risk-averse position.