Global Markets Update:
Last week's extreme market turbulence was swiftly followed by global stocks resuming their upward march and volatility reverting to their historical norms. This was a case of strong economic fundamentals reasserting themselves after a brief, if violent market stumble. For others, it was a return to irrational exuberance. In the foreign-exchange markets, there was bullishness brought about by Cyril Ramaphosa's arrival as South African president but the USD slid to a 15-month low against the yen and lost ground against all major crosses: as a result the dollar index fell to its lowest level in more than 3 years. Global equities recouped the previous week’s large losses, with the S&P500 scoring the biggest weekly gain since 2014. Risk aversion and volatility subsided despite an increase in US inflation which sparked another bond sell-off. Regional markets were more subdued, except KSA and Kuwait which strengthened in the wake of rebounding oil prices. Oil prices rebounded and took off after comments by Saudi Energy Minister Khalid al-Falih on Wednesday that KSA intends to prolong the OPEC-Russia deal on output cuts, even if it the market might be undersupplied. Gold prices were supported by the weaker dollar, but remained within their medium term range.
At the Iraq reconstruction conference in Kuwait last week, pledges of USD 30bn were received, mostly in credit facilities and investment. Ahead of the conference, officials had disclosed that rebuilding would cost around USD 88bn, with about USD 23bn required in the short term. Gulf allies provided support: Saudi Arabia to provide USD 1bn through its Saudi Fund for Development and USD 500mn in export credit; Kuwait earmarked USD 1bn in loans to Iraq and committed another USD 1bn as investments; Qatar pledged USD 1bn in loans and investments while the UAE pledged USD 500mn (while highlighting efforts of the UAE’s private sector investments in Iraq worth more than USD 5.5bn).
Kuwait’s National Assembly approved the proposal to amend the National Fund for Small and Medium Enterprises (SMEs) Law: with the amendment, the fund’s role has been expanded such that it will sponsor projects rather than solely focusing on financing.
The Qatar Stock Exchange plans to list some 5-8 SMEs this year on its ‘QE Venture Market’, which is designed to attract smaller companies.
Saudi Arabia’s central bank has signed a deal with Ripple to use the latter’s blockchain technology to instantly settle payments sent into and out of the country, resulting in faster, cheaper and more transparent cross-border transactions.
The Dubai Economy Tracker has reported it’s strongest improvement in 5 months, thanks to faster output and employment growth. The January reading increased to 56 from the 14-month low of 54.7 in December. Sector-wise, wholesale & retail (index at 56.1) performed best, followed by travel & tourism (55.7) and construction (55.2). Linked to VAT, the rate of input price inflation accelerated to the highest level since October 2011 while selling prices also rose at the fastest pace in 3 years.
The UAE has ruled out increasing VAT and excise taxes over the next 5 years, revealed the Minister of State for Financial Affairs. He also confirmed that the ministry was working on corporate tax but at an early stage of preparatory work.
The Dubai Multi Commodities Centre (DMCC) has added “Proprietary Trading in Crypto-commodities” as a licensed activity within the free zone. All business plans require approval (given this is as yet an unregulated activity) and the setting up of exchanges and brokerage services are strictly not permitted in the DMCC.
Dubai World Central welcomed 904,940 passengers in 2017, growing by 6.4% YoY. Supported by the easing of visa regulations for Russian visitors, Russia emerged as the single largest contributor to traffic from Eastern Europe with a growth of 955.4% YoY totaling 279,100 passengers last year.
UAE’s Emirates airline signed a contract to buy USD 16bn worth A380 superjumbo aircrafts, with deliveries to start as soon as 2020; Airbus would have end production of the A380 had this deal not come through.
UAE hotels saw an occupancy rate of 86.4% in January (up +1.5% YoY), according to STR Global, with both supply and demand rising by 3.6% and 5.5% respectively. Average daily rate fell 0.6% to AED 814.51 (USD 221.7), while revenue per available room improved 1.0% to AED 703.89 (USD 191.5).
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Global Markets Update: