05/04/2018 06:27 AST
Buoyed by a strong oil price of $70 per barrel, Saudi Arabia's Tadawul shot up by over 6 per cent in March 2018, according to Kuwait Financial Centre's (Markaz's) recently released Monthly Markets Review report.
The report further said that the year-to-date performance of the Saudi market is close to 9 per cent, thus becoming one of the best performing markets in the world. Given its large share in the Gulf Cooperation Council (GCC) index, this pepped up the overall index, though a closer look paints a sorry picture about other markets, especially Dubai, which is down 7.8 per cent for the year.
However, the performance of the Kuwait indices in March was polarised, while the price index lost 2.1 per cent, the weighted index gained 0.4 per cent.
The report added that the global market mood continues to be gloomy, with MSCI World declining by 2.4 per cent in March to push the year-to-date return to a negative 1.7 per cent. The S&P 500 also ended the month lower by 2.7 per cent, and the year lower by 1.2 per cent.
MSCI Emerging markets also had a bad month in March, with its decline noted in major markets, such as China and India. Globally, markets witnessed an increase in volatility as investors turned sceptical of the escalating possibility of a trade war between the US and China. VIX, currently at 20, is twice the level at which it closed in 2017.
The biggest counter to a strong oil price is the Fed rate hike. The United States Federal Reserve raised interest rates by 25 basis points, under new Fed chief Jerome Powell. Following the US fed rate hike by 25 basis points, GCC countries also followed suit by raising policy rates, except for Oman and Qatar. The Fed is expected to further raise interest rates at least twice during the remainder of the year.
Also, the US will possibly introduce a 25 per cent levy on steel and 10 per cent levy on aluminium. The main objective behind introducing the tariffs is to reduce imports and improve bilateral trade deficits, particularly with China.
The outlook for the GCC region is much more positive in the current environment, as the combined GCC budget is expected to be reduced by half, to $51 billion in 2018. Saudi Arabia is going to be the key contributor to the reduction, as the government optimises expenses, and oil prices are expected to be sustained above the current level.
In a recent blog published by Marmore, a research subsidiary of Markaz, it was mentioned that the value added tax, VAT, proved inflationary in the UAE, though it could have been much higher, as the weak real estate market limited upward movement.
With the introduction of a 5 per cent VAT, annual inflation in Abu Dhabi, the biggest emirates of UAE, more than doubled to reach 4.7 per cent in January, from 2 per cent in December. This marks its highest level since 2015.
Abu Dhabi's Department of Economic Development categorised the jump in inflation as reasonable, considering the new tax regime. Residential rents that have a weightage of 31.2 per cent in the consumer basket dipped 2.7 per cent, as compared to the previous year, partially offsetting the price rise of other goods and services.
Times of Oman
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