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Arab stock markets slow but steady.

Summary: The transition from April to May saw Arab markets step back from their previous momentum. The indices foreight of the twelve security exchanges in the Middle East and North Africa recorded lower performancewhen compared with the previous week. In terms of net weekly changes, two markets -- Saudi Arabia's Tadawul and Bahrain Bourse -- were...

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The transition from April to May saw Arab markets step back from their previous momentum. The indices foreight of the twelve security exchanges in the Middle East and North Africa recorded lower performancewhen compared with the previous week.

In terms of net weekly changes, two markets -- Saudi Arabia's Tadawul and Bahrain Bourse -- were up; four marketswere flat; and six dropped. Jordan's ASE index, down by nearly 2 percent, and AbuDhabi's ADX, down by 2.2 percent, were the weakest performers. The Dubai FinancialMarket cooled visibly to a performance of minus 0.2 percent after its 6.9 percent gain last week. The QatarExchange switched from being the previous week's second-best gainer to falling 1.7 percent and theEgyptian Exchange also stumbled from substantial gains to a weekly loss.

The Moroccan and Lebanese bourses showed small positive changes in their index movements. TheMASI's drop rate narrowed by 0.1 percentage point while the BLOM Index went from a minimal negative in week17 to minimal positive in week 18.

Only the Omani and Saudiexchanges displayed clear upward energy.When compared with week 17, the Muscat Securities Market's MSM30 narrowed its drop rate by0.9 percentage points and ended week 18 practically flat while Tadawul's TASI widened its gain by 0.7 percentage points for a 1 percent index gain. This made the TASI the top riser in MENA for the week.

TheBahrain Bourse Index, although gaining, advanced at a much slower speed than in the previous week.The Tunisian Stock Exchange's Tunindex ended April sliding further in the downward trend that started in March. The index did, however, edge up on the first trading day in May.

TheAmman Stock Exchange saw its index drop to the lowest reading since the first week of January butrecovered slightly on April 30 before going into a long Labor Day weekend.

Movements of Lebanese equities were unremarkable. But curiously, although the Beirut Stock Exchange's BLOM Index lastweek touched its lowest point since the resolution of the protracted government crisis in February, thisweakening was reversed during the two sessions on April 30 and May 2 after it was actually confirmedthat, as expected, no quorum for a vote on the presidency was reached in Parliament, just three blocks walk from the BSE.

Wider trends

While Arab markets were subdued in their index movements last week, pundits in international marketsengaged in continuing debate over the fate of the current bull market in developed economiesand the outlooks for the largest emerging markets. Their views being sharply divergent, bulls and bearsappear about equally able to find followers. Main pro-bull theses include that only a recession will killthe bull and that no signs of such a recession are present; pro-bear theorists started May by pointingto the current high upside gap between core developed market indices and their long-term movingaverages.

A single assessment where analysts are largely in agreement is that the Russian equities market,which has fallen more than 13 percent between the start of 2014 and the end of April, is set to dropfurther due to the country's political course, and there is a broad assumptionthat the political crisis over Ukraine will reflect on emerging market equities.

In the view of manyanalysts, further risk elements for emerging market equities loom in the United States Federal Reserve'sdetermination to wind down its bond-buying support for the US economy. Both of these risks are seenas important for the top tier of emerging economies, such as China, India and Brazil, and thesecond tier emerging markets such as Mexico, Turkey, Indonesia and Nigeria.

On the other hand, correlations between fluctuations in developed markets and frontier markets arelow, which gives some international retail investors an argument for diversification into frontiermarkets. Opponents of the concept point to the these markets' comparatively low levels of liquidityand political risk factors as deterrents.

When viewed in the context of varied concerns over developed and emerging markets, Arab markets appear insulated from both global financial and political concerns for the time being.

In terms of index performances, MENA markets are all positive for the first four months of the year.At the end of week 18, the benchmark indices of the Kuwaiti, Omani, Moroccan, and Tunisian bourseswere up between 1 and 5 percent. The index gains of the two Levantine exchanges were in the 5 to 10percent range. The performances then stagger from the Tadawul's 15 percent gain and Bourse Bahrain's19 percent to 21 percent for the ADX General Index; 23 percent for the EGX30; 28 percent for the QEIndex; and finally almost 54 percent for the DFM General Index. Overall, it is a performance spanning everything from marginal or modest growth to strong and almost unrealistically large gains.

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Publication:Executive (Middle East)
Geographic Code:7BAHR
Date:May 5, 2014
Words:858
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