Swinging oil price and UAE stock markets

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CORONAVIRUS IMPACT

Saudi Arabian shares dropped the most in a week, snapping four days of gains, on concern that swinging oil prices will affect the economy of the world’s largest crude exporter. A healthy correction may be the other explanation.

The 146-member Tadawul All Share Index declined 0.1 percent, the measure’s first loss since May 7, to 6,713.63.

Fluctuations in oil and commodity prices have increased market volatility in recent sessions. Investors became cautious as they watch headlines closely for trading cues.

The big money is calling a halt to the surge in stock prices. Declines in oil and metals prices are being seen by an increasing number of fund managers and strategists as a signal to get out of riskier areas of the equity market. That means sticking to the less risky equities, like the ones from utilities and service sectors.

However, UAE markets have shown strong signs of investor’s optimism. The IPO of Eshraq Properties was oversubscribed last week on ADX, while foreign investors acted as net DFM buyers by AED 28.170 mln on Thursday.

The economy of the United Arab Emirates grew 1.4 percent in real terms in 2010, according to the National Bureau of Statistics on Saturday.

UAE economy is projected to expand by 3.4 percent this year, according to Reuters data.

Expectations for the local stock markets are a still on the high side. There is room for markets to move higher, according to traders.

Crude oil futures rallied at the end of the last week with US benchmark crude climbing back to the US $100 a barrel level. The prices were boosted by positive US economic data and a decline in the US dollar, which made the dollar-denominated crude cheaper for holders of other currencies.

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