Mahmoud Jamal – Mubasher: Equity investors worldwide and the Middle East await the US Federal Reserve’s decision next Wednesday night to raise interest rates amid strong expectations of a 50 basis point increase, which if it were to happen for the first time since May 2000.
The continuation of the Fed’s moves to confront the rise in inflation, which reached its highest levels in 41 years, comes with the escalation of the economic consequences of the Ukrainian-Russian crisis..
In mid-March, 5 Gulf central banks raised interest rates by about 25 basis points, after the Federal Reserve raised the interest rate by the same amount earlier in the same month for the first time since 2018..
least affected
Analysts told Mubasher Information that the Fed’s moves for equity investors have come as a surprise, especially in light of successive reports and statements by US central officials to raise interest rates more than five times this year, noting that the region’s stock exchanges are currently suspended. due to the Eid Al-Fitr holiday extending to the end of the week. The flow will be least affected by these decisions in light of the presence of 6 factors, the most important of which is an increase in oil revenues with an increase in oil prices above the level specified in their annual budget and more than $ 100 a barrel, in addition to attracting geopolitical stability and continued investment funds in Europe and the presence of major incentives, namely support The strong government for the financial markets and the move forward with the presentation of strong government companies, and the successive disclosure by large companies of business results confirming their disposal of the repercussions of the Corona crisis.
Kuwait and Saudi Arabia
According to statistics prepared by “Mubasher Information”; Most of the region’s markets could be far affected by these factors due to the interest rate hike or even the Russian crisis, as the first index of the Kuwait Stock Exchange has risen by 21.85% since the beginning of this year, and the Saudi index “TASI” rose by 21.74%Abu Dhabi rose 18.77%, the Dubai Stock Exchange Index rose 16.4%, the Qatar Stock Exchange Index rose 16.9%, Bahrain rose 14.41% and the Muscat Market Index rose slightly increased by 0.7%. While the Egyptian Stock Exchange was most affected by the repercussions of the Ukrainian crisis, it fell by 7.5.%.
global landing
Globally, the Dow Jones fell 11.7% during the year, the Nasdaq 23.2% and the S&P 500 With 12.8%, the German DAX fell 12.2% and the French CAC 40 by 0.32.%the British FTSE 100 2.1%.
The Gulf is different
Ibrahim Al-Failakawi, an expert on financial markets, said that the performance of global and Gulf stock exchanges has been completely different since the beginning of the year, as the region has been characterized by opportunities and low challenges due to the Ukraine crisis , representing the energy and food sectors globally, noting that world and Arab stock exchanges have generally priced interest rate hikes. What we are seeing is some hedging against the temporary impact of the withdrawal of liquidity from shares known for borrowed money, especially the technology sector and its division between the currently safer banking shares and the energy sector shares, which the future in the Gulf stock exchanges, where oil is the revenue artery for the countries of the region.
Coming
In turn, Mahmoud Atta, an investment expert in equities, said that the Gulf stock exchanges had been able to withdraw liquidity from global stock exchanges since the outbreak of the Ukrainian crisis, and the evidence was the initial subscriptions that raised nearly $ 10 billion. the most prominent of which was the Dubai Electricity and Water Authority’s offer on the Dubai Financial Market, which confirms the open appetite for funds Global investment is on the risk in the shares listed in the region’s stock exchanges, and expects the Egyptian The stock market will soon return to strong activity with the activation of the government offering program in line with recent presidential prescriptions..
It is noteworthy that in the last session before the start of the 9-day holiday holiday in most stock exchanges, the instructions of Egyptian President Abdel Fattah El-Sisi to offer companies owned by the armed forces to the stock exchange before at the end of this year, in addition to the reactivation of the government supply program, the performance of its main index, AGX30, rose by about 3% in last Thursday’s session, reaching the highest daily rise in more than a month..
nature of investor
Mohamed Jaballah, Head of Business Development and Strategies at Pioneer Securities, in turn emphasized that there is one fact that cannot be overlooked, namely that the client or investor of stock exchanges is completely different from the client or investor of banks, as it is a personal nature..
He explained that there is an inverse relationship between interest rates and investment in general, as higher interest rates lead to an increase in financing costs; Which leads to a decrease in profitability in light of the stability of sales. He pointed out that financial markets, such as the Egyptian market, have already praised the effect of rising interest rates, following the exit of foreigners, and stressed that the effect of raising interest rates on the Egyptian market does not exist or the impact of which will be limited to those who already remain investors in the stock market..
Ayman Al-Zayat, a stock market expert, believes that there is an optimistic view of the stock market in light of the effort to offer the government and military companies worth $ 10 billion every year for four years, and the major new acquisitions expected by the Saudi sovereign fund, in addition to the stocks reaching low values compared to the markets of the region. It does not reflect its strong financial position.
great suggestions
Mina Rafik, director of research at Al-Marwa Securities, said in light of the Federal Reserve’s tendency to raise US interest rates, which could negatively affect investors’ appetite for risk in global financial markets in general, stock prices on the Egyptian Stock exchanges and the Gulf stock exchanges are still attractive to medium and long-term investors. .
He pointed out that this comes in light of investors’ anticipation of various stimuli that will make the region’s stock exchanges relatively independent of global markets, as investors are looking forward to several major proposals after the Eid on the Egyptian stock exchange, including companies affiliated is. with the armed forces, one of which works in the energy sector, contributing to attracting new liquidity..