On Sunday, the 4th of August 2019, a majority of Middle-east stocks winded down the day with a modest plunge, while Saudi Arabia’s major stock index was jolted 1.3 percent following a wave of withering slumps of Gulf lenders' shares prices after US Federal Reserve had slashed interest rate for the first time in a decade later on last Wednesday (July 31st).
In point of fact, latest Fed move to lower its borrowing costs by 25-basis points, which disappointed investors across the world and widely dubbed as a “hawkish interest rate-cut,” most of the Central Banks in the Gulf had followed leads of the US Central Bank.
Accusing external factors likes of an unsatisfactory Fed rate-cut alongside a 10 percent tariff hike on all remaining Chinese imports worth of $300 billion behind Sunday’s mass-scale tottering of Gulf bourses, a head of equity research at Al Rajhi Capital, Davasi wrote in a client note, “The reasons (behind the weakness) are likely to be global factors such as the Federal Reserve's cut in interest rates and trade concerns after Trump's tweets about the possibility of imposing a 10 percent surcharge on additional goods.
” Meanwhile, addressing to a lower profit margin for the Gulf lenders following a Fed rate-cut, a head of research at Riyadh Financial, Mohamed Faisal Boutrik said, “The impact of the Fed's cut in interest rates on Saudi banks is because the net interest margin has declined, while the imposition of more tariffs indicates weaker global demand, which is negative for petrochemical prices.
As these sectors represent a large part of the Saudi index, the indices have declined. The Saudi market is tracking the fall of US bourses on Friday, as well as a net fall in global oil prices during the previous two sessions.
” Quoting statistics, on Sunday’s (August 4th) market round off, Benchmark Egypt index had been the lone gainer with a rise of 0.8 percent in its main index, while Saudi Arabia’s main index fell 1.3 percent and Abu Dhabi tumbled 1 percent, while Dubai index wrapped up the day 1.5 percent lower.
Elsewhere in the Middle East, Qatar shed 0.4 percent and Kuwait shrugged off 0.4 percent, while Bahrain and Oman bourses had rounded off Sunday’s (August 4th) market almost flatlined.