Brexit: Gulf investors concerned over market moves

MARKET WATCH: The six GCC states have large interests in the British real estate market.
Updated 27 June 2016
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Brexit: Gulf investors concerned over market moves

JEDDAH: Stock markets in Gulf states including Saudi Arabia dropped Sunday in the first trading session after Britain voted to leave the European Union.
As GCC markets reacted negatively to the so-called Brexit, regional analysts, quoted by local media, said that the Brexit result could provide a golden opportunity for the Gulf investors to seek positive returns from the British market, especially in light of the sharp decline in the value of the British pound.
These analysts expect the gains for Gulf investors from the Brexit to be greater than the losses — especially real estate.
Analysts, however, suggested that Gulf investors should wait a little longer until the picture becomes more clear about the ramifications of Friday’s landmark verdict.
Ihsan Bu-Hulaiga, an economist, commented that Brexit came at an inappropriate time for Gulf countries, who are suffering from a decline in oil revenues and are searching for alternatives.
On Sunday, Saudi stocks fell 4.1 percent at the opening but recovered to close down just 1.1 percent. All 15 sectors were in negative territory.
“Investors are very concerned now over what will happen next,” Basil Al-Ghalayini, CEO of BMG Financial Group, told Arab News.
“This uncertainty will drive prices down. Unfortunately, we will go through this turbulent phase for a while until a new prime minister is found to replace David Cameron,” he told Arab News.
James Reeve, deputy chief economist and assistant general manager at Samba Financial Group, commented: "The main risk to Saudi Arabia is oil prices. The European Central Bank is likely to keep interest rates lower for longer. This will likely mean a stronger US dollar, which is negative for commodities including oil.”
The Tadawul All-Share Index closed at 6,479 points but bounced from an intra-day low of 6,257 points. Petrochemical blue chip Saudi Basic Industries Corp. fell 1.5 percent and National Commercial Bank was down 1.3 percent.
But Arabian Pipes, which soared last week after winning a contract from Saudi Aramco, jumped its 10 percent daily limit for a fourth straight day. Saudi Electricity Co., seen as a defensive stock, rose 1.6 percent.
On the Saudi exchange, 356 million shares were exchanged, 67 percent more than the 20-day average.
Out of the Tadawul’s 172 index members, 149 fell.
John Sfakianakis, director of economics research at the Gulf Research Center, commented: “There is limited impact between Saudi Arabia and the UK financial system and any impact will depend on secondary effects at a global level.”

He added: “There is a certain degree of risk-aversion over the short term. Over the medium term, investor confidence would be impacted by oil prices and the direction and confidence of global economic growth.”
Sfakianakis said: “Emerging market debt could see an uptick as liquidity takes priority over the short term. Fundamentals will drive economic growth over time. There is limited impact between Saudi Arabia and the UK financial system and any impact will depend on secondary effects at a global level.”
Speaking to Arab News, a regional analyst said: “The main challenge for now is the uncertainty (as always!!). Everyone knows that this will have implications but it is too early to tell how, how soon, and in what ways. Markets always overreact to uncertainty.”
He added: “I agree that the exposure of Saudi listed companies to the UK is probably likely to be fairly limited. However, many will have relationships with UK-based banks and affected by the volatility of the pound as well as many questions marks about the future of banking regulation in the country.” 
The analyst said: “For Saudi investors, a weaker pound represents a short-term opportunity, albeit into a market that now looks far less clear and predictable. For Saudi exporters, a weaker pound means a tougher market, whereas the competitiveness of UK products will increase.”
He added: “Strategically speaking, companies that had used  the UK as a global hub or a springboard for the UK market, the future suddenly looks far murkier.”
The analyst also said: “While the real economic impact on Saudi Arabia will likely be modest, the uncertainty in the UK, and its global implications will now potentially rumble on for a fairly long time.”
All seven GCC stock markets were closed on Friday when the result of the British referendum was announced.
The Dubai Financial Market began the day by sliding 5.0 percent, but the index — the Gulf bourse most exposed to international markets — finished the day down 3.25 percent.
At one stage, investment companies fell 8.0 percent and real estate dropped 5.0 percent.
The Qatar Exchange fell 1.25 percent, the Abu Dhabi Securities Exchange dropped 1.85 percent and the Kuwait Stock Exchange closed 1.1 percent lower.
The bourses of Oman and Bahrain ended the day down 0.6 percent and 0.7 percent respectively.
The six GCC states have large interests in the British real estate market and thousands of Gulf citizens own homes in Britain.
Britain also has sizable real estate interests in Dubai and more than a million British tourists visit the UAE annually.


US, China in feisty clash on trade, influence at APEC

Updated 17 November 2018
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US, China in feisty clash on trade, influence at APEC

  • The world’s top two economies have been embroiled in a spiralling trade war, imposing tit-for-tat tariffs on each other’s goods
  • The APEC summit of leaders from 21 countries across the region has developed into a tussle for influence between an increasingly assertive China and a more withdrawn US

PORT MORESBY: China and the United States traded heated barbs Saturday ahead of an APEC summit, lashing out at each other over protectionism, trade tariffs and “chequebook diplomacy” in the region.
In duelling back-to-back speeches at a pre-APEC business forum, China’s President Xi Jinping and US Vice President Mike Pence pulled few punches, laying out sharply contrasting visions for the region of 21 countries.
Xi lashed out at “America First” trade protectionism and in a thinly veiled swipe at Washington stressed that global trade rules should not be applied “with double standards or selfish agendas.”
The world’s top two economies have been embroiled in a spiralling trade war, imposing tit-for-tat tariffs on each other’s goods in a confrontation that experts warn could torpedo the global economy.
Xi urged the world to “say no to protectionism and unilateralism,” warning it was a “short-sighted approach and it is doomed to failure.”
For his part, a combative Pence warned that US tariffs would remain in place unless Beijing “changes its ways.”
“We’ve put tariffs on $250 billion in Chinese goods and that number could more than double,” he told CEOs from around the region.
“We hope for better, but the United States will not change course until China changes its ways.”
President Donald Trump decided to skip the summit in Papua New Guinea, leaving the door open for Xi who arrived two days earlier for a state visit and has been the undoubted star of the show.
The APEC summit of leaders from 21 countries across the region has developed into a tussle for influence between an increasingly assertive China and a more withdrawn US.
In contrast to Trump, Xi arrived before the summit, opening a new road and a school in Port Moresby and holding talks with Pacific Island leaders.
Papua New Guinea rolled out the red carpet for the Chinese leader, with dozens of people from various tribes serenading him sporting parrot feathers, possum pelts and seashell necklaces.
In his speech, Pence lashed out in unusually strong terms at China’s Belt-and-Road initiative that sees China offering loans to poorer countries in the region to improve infrastructure.
The vice president encouraged Pacific nations to embrace the United States, which, he said, did not offer a “constricting belt or a one-way road.”
He said the terms of China’s loans were “opaque at best” and “too often, they come with strings attached and lead to staggering debt.”
As if pre-empting the criticism, Xi defended the plan amid attacks that it is akin to “chequebook diplomacy” to further Chinese interests in the region.
He denied there was a “hidden geopolitical agenda... nor is it a trap as some people have labelled it.”
And the Chinese leader warned that no one would gain from heightened tensions between the US and his emerging superpower.
“History has shown that confrontation — whether in the form of a cold war, hot war or trade war — will produce no winners,” he said.
Pence too stressed that Washington wanted a “better relationship” with Beijing.
“China has an honored place in our vision of a free and open Indo-Pacific, if it chooses to respect its neighbors’ sovereignty, embrace free, fair, and reciprocal trade, and uphold human rights and religious freedom,” he said.
He added that the United States would join forces with Australia in the development of a new naval base to be built in PNG’s Lombrum Naval Base on Manus island, in what is seen as a move to curb China’s influence in the Pacific.
Officially, the 21 leaders will discuss improving regional economic cooperation under the theme of “embracing the digital future” but the punchy speeches laid the ground for a tense gathering.
Foreign ministers meeting ahead of the summit were unable to publish a joint statement, apparently due to differences over language on World Trade Organization reform.
In the absence of Trump and Russian President Vladimir Putin, the summit itself has been relatively low-key and the focus has turned to the venue Port Moresby.
The capital of Papua New Guinea has been ranked as one of the least liveable cities for expatriates, with a high level of crime, often perpetrated by feared street gangs known as “raskols.”
Delegates have been advised not to venture out alone — especially after dark — and officials and journalists have been hosted on massive cruise ships moored in the harbor due to safety issues and a dearth of hotel rooms.
The run-up to the summit was also overshadowed by the purchase of 40 luxury Maserati cars that sparked anger in the poverty-hit country, which suffers from chronic health care and social problems.