GCC Equity Markets Mostly Positive in Q2

GCC equity markets staged a strong recovery in the latter part of 2Q20, reversing a large part of the prior losses induced by the coronavirus and its associated lockdowns and restrictions. The recovery was underpinned by rising oil prices and a gradual reopening of regional economies which helped boost optimism for a swift economic recovery.

NBK’s update on equity markets, noted the MSCI GCC index gained 11 % quarter-over-quarter, lifted by strong gains in some regional markets. Meanwhile, Kuwait lagged behind, though still up a solid 6.4 % q/q, supported in part by the confirmation by MSCI of the markets upgrade to EM status in November, thereby curbing some uncertainty about upgrade-related portfolio (passive) inflows which could be worth US$2-US$3 billion. This has re-ignited active foreign inflows, which were relatively dormant for most part of the year, reverting to positive net flows of KD 3.6m in June and reflecting renewed foreign investor interest in Kuwaiti stocks. Oman (2 %) and Bahrain (-5 %), underperformed, likely affected by high uncertainty about the economic outlook amid the coronavirus shock given their smaller reserves and fiscal buffers.

Despite various signs of improvement, downside risk remains elevated given the uncertainty surrounding both the coronavirus and oil prices, and their impact on economic growth, investor sentiment, and governments’ finances. regional equities will continue to be influenced by global factors, such as a resurgence of trade tensions and a slower-than-expected global economic recovery.

According to analysts at Kamco Invest, Qatar’s QSE-20 index was the best performing index in the GCC in July2020, as the index closed at 9368.17 points and was up by 4.1 % month-on-month.

The Qatar All Share index which maps the broader market, also gained by 4.2 %, as all sectors closed in the green. The Real Estate index was the best performing sectoral index gaining by 5.8 % month-on-month.

Meanwhile, global equity markets were broadly positive in 2Q20 on optimism about a relatively swift economic recovery following the easing of lockdowns and business restrictions. The recovery was helped by continued central bank stimulus.