Instability in the Arab world and the impact of the euro-zone debt crisis have taken their toll on global and regional markets this year, shaking investor confidence. An exodus of capital from the Middle East has contributed to the Dubai Financial Market General Index losing 15 per cent of its value so far this year. A total of 10 per cent has been shaved off the Abu Dhabi Stock Exchange General Index.
However, financial markets observers believe that the local stocks have bottomed out during the past two weeks.
As politics are gaining more influence over market direction lately, news about positive developments around the world are driving global markets in the greener territories during the last few days, with risk-on sentiment visibly on the rise.
Optimism about a solution to the European debt crisis rose last Thursday after Mario Draghi, the president of the European Central Bank, made comments that were widely interpreted as opening the door to a European version of the already adopted by many countries quantitative easing — huge purchases of government bonds to stimulate bank lending and growth. Signs of a grand bargain to save the euro, along with a drop in U.S. unemployment last Friday, helped push up major stock indexes in Asia, Europe and the United States on Friday.
Led by banks and petrochemical companies, Saudi shares rose Saturday for the first in three days. The Saudi stock benchmark Tadawul All Share Index advanced 1.07 percent to close at 6,169.61 points, its highest level since Nov. 20.
Local investors’ optimism is rising also ahead of a decision this month by MSCI about a promotion of the UAE to “emerging” market status. Such move would open the country to a global market of US$3 trillion (Dh11.01tn) in funds benchmarked against MSCI’s indexes globally.