GCC equity markets rebound even as outlook appears murky

GCC equity markets posted their strongest monthly performance in seven months in August, with the MSCI GCC index up 3.9% — breaking a three-month losing streak as regional geopolitical tensions eased, according to Kamco Invest’s monthly report (pdf). The rally tracked a broader global rebound: the MSCI World Index gained 2.6% on a healthy earnings season.

Saudi Arabia led regional gains with a 5.1% rise — its best month since January — followed by Oman (+4.5%) and Kuwait (+1.6%). Abu Dhabi added 0.9% and Dubai 0.7%, while Qatar (-1.1%) and Bahrain (-1.0%) were the only markets to close the month lower.

The rally was broad-based across sectors, led by hotels and leisure (+10%), materials (+8.2%), and ins. (+7.5%). Telecom rose 5.0% and banking 4.7% — the region’s most heavily weighted sectors. One outlier: energy stocks, despite elevated and volatile oil prices tied to the closure of the Strait of Hormuz, gained just 1.2% — the weakest of any sector.

YTD, the picture is more mixed — and it’s Oman, not Saudi Arabia, that leads the region. The MSX 30 is up 29.6% YTD, by far the GCC’s best performer, built on outsized gains of 7.9% in January and 16.8% in February. Saudi Arabia (+6.1%) and Abu Dhabi (+0.1%) are the only other markets in positive territory for the year, while Qatar (-8.9%), Bahrain (-6.3%), and Dubai (-3.5%) remain the laggards.

The outlook has since grown murkier. Kamco’s report notes that global bond yields already hit their highest level since 2008 by the end of August as Fed comments raised the odds of a September rate hike. That selloff has deepened further: Japan’s benchmark yield hit 3% for the first time since 1996, and Australia’s 10-year touched its highest since 2011, after renewed US-Israeli strikes on Iran pushed Brent crude above USD 91/bbl. JPMorgan’s Tai Hui says the risk for the region runs through energy prices directly — a prolonged regional stalemate, paired with depleted inventories and rising winter fuel demand, points to further upside pressure on global headline inflation.

MARKETS THIS MORNING-

Asian markets tumbled at the open today, as Japan’s Nikkei and South Korea’s Kospi each dropped roughly 2.4%. The slide mirrors Wall Street’s overnight decline, driven by escalating regional conflict and a worsening government bond crisis.

THE CLOSING BELL-

The EGX30 rose 1.0% at yesterday’s close on turnover of EGP 16.1 bn (43.8% above the 90-day average). Regional investors were the sole net sellers. The index is up 32.5% YTD.

In the green: Abu Qir Fertilizers (+8.8%), AMOC (+8.2%), and Emaar Misr (+5.4%).

In the red: Orascom Construction (-4.3%), ADIB (-2.5%), and GB Corp (-2.4%).