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Investors begin 2018 on upbeat note
January 04, 2018
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LONDON: World stocks hit fresh highs on Wednesday with European markets joining the party as early indications suggest 2018 will be another year of synchronised global growth led by a robust European economy.

Most major Gulf stock markets rose on Wednesday as some buyers returned from New Year holidays, and shares in Dubai’s blue chip Emaar group rebounded for a second straight day.

Egypt lagged, however, led lower by a few blue chips.

Dubai’s index added 1.4 per cent to 3,459 points in rising volume as Emaar Properties, which had surged 3.6 per cent on Tuesday, gained a further 2.9 per cent. Emaar Development jumped 3.8 per cent and Emaar Malls added 1.8 per cent.

Shares in the group fell sharply last year because of a slump in Dubai’s real estate market, but they have become the focus of investors betting that heavy spending by the government will buoy the economy and help the market stabilise this year.

Several other beaten-down Dubai stocks also rebounded on Wednesday, with amusement park operator DXB Entertainments surging 5 per cent, although logistics firm Aramex stayed weak, edging down 0.2 per cent.

The Dubai index has turned technically bullish this week, beginning to rebound from the bottom of an uptrend channel dating back to early 2016. Technically, a rise in coming months to near the top of the channel would not be surprising, and would take the index above 3,700 points.

Saudi Arabia’s index, which had fallen in the first two days of this year after the government hiked domestic gasoline prices, rebounded 0.7 per cent to 7,224 points.

Banks led the market with 10 of 12 gaining ground. National Commercial Bank, the biggest, surged 3.1 per cent, although trading volume was modest.

The Saudi index edged up just 0.2 per cent last year but many fund managers expect a better 2018 because of higher government spending. Santhosh Balakrishnan and Faisal Potrik, analysts at Riyad Capital, issued a report predicting the index would hit 7,936 points this year.

They based the forecast on the market trading at 14.5 times estimated corporate earnings for 2019, helped by economic reform, expected decisions by MSCI and FTSE to include Riyadh in their emerging markets indexes, and the planned listing of oil giant Saudi Aramco in late 2018 fuelling interest in the market.

After three years of decline, Saudi corporate earnings have started to improve, led by banks and petrochemical firms. This should let price/earnings multiples expand, even though firms’ top lines have so far been stagnant, the analysts argued.

Blue chips were bought in Kuwait on Wednesday with National Bank of Kuwait, the biggest lender, gaining 2.4 per cent and logistics giant Agility rising 1.6 per cent. The Kuwaiti index climbed 1.4 per cent.

Egypt’s blue-chip index fell 1.3 per cent on Wednesday, although the broader EGX100 fared much better, slipping only 0.4 per cent.

After its biggest one-day gain in more than two weeks on Tuesday, and in the wake of its best year since 2009 in 2017, MSCI’s index of global stocks, which tracks shares in 47 countries, pushed on to new record highs.

The pan-European stock index was 0.2 per cent higher following gains for their Asian and US counterparts overnight as manufacturing surveys pointed to a strong start for the European economy. US stock futures suggested another higher open on Wednesday.

The single currency was holding near a four-month high of $1.2081 hit on Tuesday.


“Investors have woken up in the new year and looked forward to another firm year for global growth with very muted downside risk,” said Investec economist Philip Shaw. But he warned against reading too much into the first two trading days of the new year.

“The converse is the sell-off in bond markets: the idea that inflation pressures may be firmer than expected and central banks could take a slightly more aggressive approach than previously thought,” Shaw added.

ECB rate-setter Ewald Nowotny told a German newspaper that the European Central Bank may end its stimulus programme this year if the eurozone economy continues to grow strongly.


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