Cairo's stock market showed little reaction on Sunday to an unexpected interest rate hike in Egypt, tempered by comments by the deputy finance minister, while a sharp drop in crude oil weighed on Saudi Arabia's petrochemical sector. The central bank, faced with accelerating inflation, on Thursday raised rates by 200 basis points for the second policy meeting in a row, wrongfooting economists who had forecast no change.
Deputy finance minister Mohamed Meait told Reuters on Saturday the hike was only temporary. Cairo's blue chip index edged down 0.1 percent, a far milder reaction than the 2.5 percent drop that followed a previous rate hike on May 21.
Analysts at Naeem Brokerage said in a note that the market might witness a slight temporary correction, adding that banks might benefit because they expected higher investment income to offset delinquencies and slower credit growth. The largest listed lender, Commercial International Bank added 1.4 percent on Sunday. Shares of Advanced Petrochemical, the first Saudi company to report second-quarter earnings, lost 0.7 percent after only a 1 percent year on year increase in second-quarter net profit.
Eight of the other 14 listed petrochemical makers declined, helping drag the index 0.5 percent lower. Riyad Capital expects net earnings for the petrochemicals sector to shrink 13 percent year on year. "We expect margins to be lower as product spreads continue to weaken while shutdowns could constrain already impacted sector," it said in a note.
Qatar's index edged down 0.2 percent in the lowest daily traded volume since Saudi Arabia and three other Arab states cut diplomatic and trade links with Doha on June 5. Twenty shares rose while 15 shares. In their statement late on Thursday, the four Arab states said the initial list of 13 demands they had put to Qatar was now void and they pledged further political, economic and legal steps against the emirate.
Gulf funds not including Qataris were net buyers by a tiny margin for the first time since the crisis erupted, bourse data showed. They made up a little over 5 percent of the total market turnover on Sunday. Locals made up a little under three-quarters and were net buyers.
The Abu Dhabi index added 0.3 percent, as shares of Dana Gas, which made up a little half of the total market turnover on Sunday, rebounded 1.5 percent. On Thursday Dana fell 1.4 percent after sources told Reuters that London's High Court planned to hold a full hearing in September on efforts by the company to restructure $700 million of Islamic bonds.
In neighbouring Dubai shares favoured by short-term retail investors were the most active, with builder Arabtec jumping 7.4 percent to 3.47 dirhams. "The trend shall remain bullish towards the next barrier at 3.56 dirhams, where it may attract profit taking, but a break over shall ignite aggressive buying until the previous highs of 4.00 - 4.20 dirhams," said a note by NBAD Securities. The stock has been strong since last week when Arabtec announced winning projects worth 755 million dirhams.