Oil rally in August augurs well for regional markets

Global equity markets posted modestly positive results in August, with world stocks up nearly 0.5 percent on average as many investors continued to heed central bankers’ announcements as much as the underlying economic data. 

While most of the world’s central banks continued to provide additional stimulus in August investors saw the US Federal Reserve’s (Fed’s) stance turn more hawkish during the month, mainly because the country’s labor market continued to progress steadily. 
US Fed Chairperson Janet Yellen used an annual meeting of central bankers in Jackson Hole, Wyoming, to declare that “the case for an increase in the federal funds rate has strengthened in recent months.”
Federal Reserve’s Vice Chairman Stanley Fischer signaled that two interest rate rises were possible before the end of the year, and his statements sparked a sell-off in US shares nearer the end of August. 
Oil prices rallied during the month, with Brent crude oil trading at more than $48 per barrel by the end of August, some 15 percent higher than their lowest point during the month. 
Speculation that an informal OPEC meeting in September might agree to freeze production helped boost prices for most of August. 
More recently, however, prices pulled back, after Saudi Energy Minister Khalid Al-Falih told reporters: “We don’t believe any significant intervention in the market is necessary.”
Emerging-market equities posted substantially higher returns than stocks in developed markets in August. 
Stocks in Saudi Arabia fell more than 1 percent in August, even in the absence of significant negative news. 
Oil prices rallied, but Saudi equities’ correlation with oil has traditionally been low. 
In financial markets, Saudi Arabia’s Capital Market Authority (CMA) announced new rules to make it easier for foreign investors to invest in Saudi stocks and help expedite the Saudi market’s inclusion in international stock market indices. 
In this respect, the CMA also called for Saudi-listed firms to adopt International Financial Reporting Standards (IFRS) by Oct. 30. 
The previously announced initial public offering (IPO) of Saudi Aramco is now likely to take place in early 2018.
The company is not planning to seek strategic partners to participate in the offering, but will open its offering to all investors, with target markets to be decided at a later date.
Qatari stocks progressed over 8 percent in August as it was confirmed that the country’s market will be included in the FTSE Emerging Index from mid-September onwards. 
Stocks in Egypt were down less than 1 percent in August, after strong gains in previous months. 
Stock markets in the UAE were up just under 1 percent in August. 
Stocks in Kuwait, Jordan and Bahrain were down around 1 percent during the month. 
Jordan signed a memorandum of understanding with Saudi Arabia to boost the Kingdom’s investments into Jordan, especially in the fields of energy, tourism and infrastructure.
Stocks in Bahrain fell more than 1 percent in August. 
Work on the $1.1 billion revamp of Bahrain International Airport — one of the biggest ever projects financed by the Gulf Development Fund — is set to begin in October.

— Bassel Khatoun is CIO of MENA Equity

Source: Arab News