Gulf stocks get summer reprieve after slumping in first half

Stocks in the Gulf region are rebounding in the summer after slumping in the first half of 2024 as upbeat earnings reports and cheaper valuations entice buyers.
The MSCI GCC Countries Combined Index climbed 3.6% this month through Wednesday’s close, adding to June’s gains. Dubai has led the advance among regional benchmarks, with those in Abu Dhabi, Saudi Arabia, Kuwait and Qatar also in the green.
Equities in the six-country bloc are still lower so far this year over concerns about regional growth, the direction of oil prices and the path of interest rates in a market largely made up of banks. Saudi Aramco’s $12.4bn secondary share sale has especially weighed on the kingdom’s market — the largest in the region — as investors reserved cash for the deal as well as other initial public offerings in the region.
Gulf stocks have advanced amid “resilient corporate earnings and dividend expectations and cheaper valuations than before,” said Hasnain Malik, head of equity strategy research at Tellimer in Dubai. Those factors as well as “the passing of any drain on liquidity from the Aramco transaction have all helped GCC equities recently, in the face of another step down in oil price,” he said.
Still, the Gulf stock index is underperforming the MSCI Emerging Markets Index — up 5% in 2024 — as risks still linger. Oil prices have pulled back from yearly highs, government projects are seeing delays and scalebacks and the International Monetary Fund has downgraded its growth projections for Saudi Arabia, the region’s largest economy. As a result, some investors say the upside is capped.
“I will not read much into the rebound and I expect the market to be range-bound,” said Faisal Hasan, chief investment officer at Al Mal Capital. “Regarding earnings, I would like to see improvement both on a quarterly and yearly basis, and more importantly, what is the guidance for the next quarters.”
Banks in the United Arab Emirates largely beat estimates so far this season, including its largest lenders — First Abu Dhabi Bank and Emirates NBD. In Saudi Arabia, Jarir Marketing Co and Saudi Telecom Co are among those that surpassed expectations.