(MENAFN- Gulf Times) GCC market sentiment remains unbalanced due to weak oil prices, China's troubled economy and uncertainty over the outcome of the US Federal Reserve meeting, Invest AD (Abu Dhabi Investment Company) has said in a report.
On equities, Invest AD said that with oil prices still weak and troubling economic signs continuing to emerge from China, global developments will dictate investor sentiment and movements in the GCC markets in the near term.
These factors, along with uncertainty over the outcome of the US Federal Reserve meeting, weighed on regional markets in September, and with a number of analysts forecasting lower oil prices for a longer period of time, investors are closely watching for any announcements on government spending, which remains the key driver of economic activity in most GCC countries, it said in its latest markets outlook.
In Saudi Arabia, various punitive measures were taken against construction giant Saudi Binladin Group after the unfortunate crane accident in the Holy City of Makkah. It should be noted that the Saudi banking sector has significant exposure to the group, and any serious stress on its cash flows could impact the country's banks. Within the GCC, sentiment around the UAE appears to be more positive than other markets. From late October, Q3 corporate results could emerge as a new driver of regional market direction, Invest AD said.
On fixed income, Invest AD said regional and global markets remain on edge in the aftermath of the US Fed's decision and the resulting uncertainty for the global investor base. The end of September saw hawkish comments from some Fed board members that stoked further negative sentiment in global equity, credit and forex markets.
The Fed's mixed messages kept volatility in the markets elevated throughout the period, with further emerging market weakness driving down asset prices and the negative news flows coming out of the Volkswagen scandal weighing on markets further, with the automobile sector specifically affected.
Weak Chinese PMI data contributed to the negative mood and Chinese stock markets moved lower, affecting other major Asian markets as well. The China data came on the back of warnings from the IMF that China's growth slowdown could have more spillover effects in the region than originally anticipated.
The negative news had a clear effect on global commodity markets, with aluminium, zinc, copper, platinum, silver and oil trading lower. Emerging market currencies also depreciated, with South Africa, Poland, Mexico and Chile bearing the brunt of the commodity weakness.
Apathy towards frontier markets continues as liquidity has dried up and investors are looking to exit commodity-focused markets like those in the Middle East and sub-Saharan Africa, it said.
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