Hopes that a U.S. military strike on Syria will be avoided are likely to bring more buyers into Gulf markets on Thursday as investors focus on strong underlying economies.
The five permanent veto-wielding powers of the U.N. Security Council met in New York on Wednesday to discuss plans to place Syria’s chemical weapons under international control. Although there appeared to be no breakthrough in the meeting and there is considerable doubt over whether the plans can work, for now at least investors’ geopolitical fears are easing.
“The more the Syrian story vanishes, the more people will look at the global economic backdrop and realize it’s improving,” says Sebastien Henin, portfolio manager at The National Investor in Abu Dhabi. Earlier this week, China posted stronger-than-expected industrial output and retail sales.
“At the same time, the trend is the same in GCC [Gulf Cooperation Council] economies,” Henin added of the region’s robust economic growth. “In the next two weeks, we should come back to levels before the noise on Syria started.”
U.S. Secretary of State John Kerry and Russian Foreign Minister Sergei Lavrov are to meet later on Thursday in Geneva to talk about Syria’s chemical weapons arsenal, and this meeting may be more substantive than the one in New York.
In the United Arab Emirates, shares in telecommunications operator Etisalat may attract buyers. Morocco’s Minister of Foreign Affairs told reporters on Wednesday that Etisalat’s planned deal to buy a majority stake in Maroc Telecom would be finalized in one or two months; investors have generally viewed the deal as positive, by helping Etisalat move beyond its saturated home market.
Saudi Arabia’s Petro Rabigh may face some pressure after it said it had temporarily halted operations after a sudden cut in power and steam supplies. It is not clear when operations will resume; a power cut early this year caused a suspension of 20 days.
In Egypt, sentiment may be supported after Cairo’s central bank chief said Kuwait would deposit $2 billion in the bank next week, part of aid promised in July.
Global cues are positive for regional investors; Asian shares have eked out small gains while the dollar remains under pressure on Thursday on growing expectations that the U.S. Federal Reserve’s impending stimulus reduction might be smaller than some have believed.
Brent crude futures are holding steady above $111 a barrel on Thursday.