Most stock markets in the Gulf rose in early trade on Thursday after the U.S. Federal Reserve hiked interest rates as expected but signalled no acceleration in the pace of monetary tightening.
However, the Gulf lagged other emerging markets around the world because of concern that low oil prices and government austerity measures will continue to weigh on corporate earnings. Among planned austerity steps, the six-nation Gulf Cooperation Council plans to introduce a 5 percent value-added tax in 2018.
The Saudi stock index rose 0.8 percent in its first 20 minutes of trade, while Dubai was up 1.3 percent and Qatar added 1.0 percent. MSCI’s emerging market index climbed 1.7 percent.
Saudi banks were strong and construction firm Khodari rose 1.6 percent in unusually heavy trade, after jumping 7.1 percent on Wednesday.
In Dubai, GFH Financial gained 1.9 percent and Shuaa Capital added 2.7 percent. GFH confirmed earlier this week that the two firms were in talks to merge and after a week of silence, Shuaa issued a brief statement early on Thursday saying preliminary discussions were taking place but no decision had been reached.
Qatar was buoyed by a 1.7 percent rise in Qatar Industries , although Qatar Navigation sank 3.6 percent as it went ex-dividend.
Abu Dhabi’s index was flat, restrained by Abu Dhabi Commercial Bank, which fell 2.4 percent as it went ex-dividend.
The central banks of Saudi Arabia, the United Arab Emirates, Kuwait and Bahrain raised official interest rates by 0.25 percentage point in response to the U.S. hike, but market rates in the Gulf will not necessarily rise because a partial rebound of oil prices and governments’ international bond issues have eased pressure on state spending.
Commercial bankers said it was not clear on Thursday morning whether Qatar’s central bank would choose to imitate the U.S. hike. Central bank officials were not available to comment.
