Markets may rise further if global backdrop remains supportive

27 Oct, 2014

DUBAI: Stock markets in the Middle East may continue rising on Monday because of positive third-quarter results and technical factors, although any change of direction in global markets or sharp oil price decline could undermine the rally.

Dubai's bourse rose 2.5 percent to 4,689 points on Sunday, closing back above its 200-day average at 4,594 points, a positive technical signal.

In Abu Dhabi, Union National Bank may rise after its third-quarter net profit came in ahead of estimates. The lender made 552 million dirhams ($150 million) in the quarter, while analysts polled by Reuters had on average forecast 525.2 million dirhams.

Some companies not covered by analysts also posted solid profit growth. Qatari property developer Ezdan Holding reported a 39 percent jump in nine-month profit late on Sunday, and Dubai Investments reported a 17.4 percent increase in third-quarter profit on Monday.

In Saudi Arabia, however, Saudi Electricity Co (SEC) , the Gulf's largest utility firm, posted a 6.5 percent drop in third-quarter net profit on Sunday. It made 2.67 billion riyals ($712 million) during the three months to Sept. 30, while HSBC had forecast SEC would earn 3.11 billion riyals.

The global backdrop is modestly positive; Asian equities rose on Monday morning on the back of upbeat US economic data and slightly better-than-expected health checks on euro zone banks.

But Brent crude oil futures fell below $86 a barrel on Monday after Goldman Sachs cut its price forecasts for the contract and for US oil in the first quarter of next year by $15.

Although there is no strong correlation between oil prices and local stocks, cheaper crude has impacted some petrochemicals firms' results by devaluing their inventory, and may affect Gulf retail investors' sentiment.

Moves in European stock markets, which will open later in the day, have often influenced Gulf markets over the past several weeks.

Copyright Reuters, 2014

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