Local markets wait for US interest rate cuts

Union

Abu Dhabi Financial Market (ADSM)

Mustafa Abdul Azim (Dubai)

This week, local stock markets are watching the decision of the US Federal Reserve, which is expected to move towards the first interest rate cut after four years of short-term leverage, in order to revive the wave of gains seen on markets for 20 consecutive sessions, at 59 billion dirhams.
Analysts expect this decision to have a positive impact on the market, especially when the Central Bank of the UAE followed the example of the Federal Reserve, given the expected impact of this measure on the national economy, all the while as interest rate reduction decisions are generally made to stimulate growth and allow investors to borrow at rates of interest. Less interest to develop their economic activity.

Stimulate demand
The banking and real estate sectors in the domestic stock markets are in line with badysts 'expectations regarding the top sectors, which should benefit from the interest rate decision, which will boost demand for credit to support banks' performance and will also offer investors the opportunity to return to real estate investing. Less interest on the mortgage.
Wadah al-Taha, a member of the UK Securities Institute Advisory Board in the United Arab Emirates, predicted that markets would continue to grow in the coming period, taking advantage of optimism and restoring confidence.
In addition to the expected surge when the US Federal Reserve announced this week its decision to lower interest rates, which should be within half a percentage point, which will have an impact positive on the performance of UAE banks in the second half, American, as this will boost borrowing.
He predicted that borrowing levels would increase significantly as a result of this decision, particularly in the light of indications of a real appetite for borrowing, as evidenced by data from the Central Bank, which show an increase in borrowing from 94% at the beginning of the year to 95.4% at the end of June.
Al-Taha pointed out that the positive performance of local stock markets since early July in general reflected a kind of optimism that was evident to many investors and led stocks to record continuous gains, based on the rules of the stock market. attractive price of purchase.
Al-Taha attributed the rise in shares in July to a number of factors, mainly internal, namely the positive results announced by banks for the first half of this year, many of which exceeded expectations, which strongly encouraged markets to continue to grow, boost investor morale and reduce the frequency of worries. Has been rumored for a while.
Despite expectations of continued pressure on the real estate sector in Dubai, particularly with regard to the balance between supply and demand, and the impact on the performance of property values ​​and the results of some companies, there should be no surprises, but what increases the chances of continued positive performance this month is The ability of markets to react to external factors on the one hand, and historical performance of markets in July of each year, reflecting the positive performance this month.

Open the properties
He pointed out that recent discussions on the proposal to open the ownership of foreigners in joint stock companies, however, do not go beyond the scope of the proposal and that in the case of the company, the study, will take months, as they require legislative and legal changes, but create a positive market climate.
Al Taha added that these factors coincided with other external factors such as the stability of international oil prices and the positive performance of the US stock markets, which constituted a set of motivating factors for markets to continue. to make progress, with marked disregard for geopolitical concerns and political tensions in the region. Markets and investors are absorbing these fears.
Al-Taha has not ruled out the fact that markets are going through periods in which equities are correcting or taking profits for gains realized in the previous period, but they are generally able, thanks to the factors mentioned above, to overcome these transactions and continue to move in a positive range, particularly in response to the interest rate decision. It was also subject to improving liquidity levels.

July Catalysts
"The markets continued to benefit from the incentives received by the main shares of the Abu Dhabi and Dubai markets, particularly the banking and real estate sectors, following the positive results announced by the domestic banks," Esam said. Kasabia, Senior Financial Analyst at Mena Corp Financial Services. What was good, as well as the agreements and contracts signed by Emaar Properties in China and the acquisition of Aldar Properties in Abu Dhabi by the government orders more than 5 billion dirhams.
It expects markets to continue their upward trend, likely to reduce interest rates, stimulate borrowing demand pending the decision to reduce the rate of interest. US interest in the coming days, which should have a positive impact on global and local markets, especially in the banking and real estate sectors.

Levels of liquidity
Walid Al Khatib, Managing Partner of Global Equity & Bonds, said: "The gains observed in local stock markets during the last period and the continuous positive fluctuations in the indicators, although reflecting the interaction of markets with the external factors, particularly with regard to geopolitical calm in the short term To ensure its continuity, we must however ensure that markets receive greater liquidity and greater confidence. "