For many financial markets 2014 was a difficult year, but there are some positive elements moving forward, and a long wish list for the upcoming year.
Daleen Hassan discussed the major events of 2014 and the forecast of the financial markets for the coming year with the chief market strategist in ADS securities Nour Eldeen Al-Hammoury.
“The US stimulus packages helped the markets perform better than expected, could we see the Federal Reserve raise interest rates in 2015?”
“In a short period of time everything has changed dramatically due to falling oil prices. The estimates for a sooner rate hike are very low. Furthermore, there are some negative figures that began to show such as the PPI (Producer Price Index) and the factory orders, in addition to the housing market. Therefore we believe that the Fed might not be able to raise the rates in 2015.“
“In Asia, China’s economic growth slowed and Japan’s fight against recession flagged. What are the prospects for the region next year?”
“Beginning with China, the main focus and the concerns will be over the credit market which reached alarming levels, and we will be watching what the People’s Bank of China will do.
For Japan, we believe that the Japanese economy will remain in a recession over the next year as we believe that the Prime Minister’s polices will deepen the recession.”
“It’s certainly been a stressful year for Europe, Do you think the ECB will take effective action next year? And how bad can things get for Russia?”
“They must take action very soon, the economic situation has deteriorated significantly in the past few months, despite the ECB’s recent decisions. Furthermore, declining oil prices will put a greater downward pressure on inflation and Europe might suffer from deflation soon.
“In Russia, things might get even worse as declining oil prices are affecting Russia directly, this is a side effect of the western sanctions and the crash in the Russian Ruble. But keep in mind that it’s not only Russia, it’s also here in the Middle East.”
Review of Middle East Markets
The Middle East began the year in an encouraging way.
Saudi Arabia’s TASI index soared by 30% before losing those gains and turning negative by about three percent as year’s end approached.
However, there are big changes ahead with international investors being welcomed. The plan is to open the $530 billion Riyadh stock market to them for the first time in early 2015. Investors confidence is on the rise and more liquidity is coming from foreign and Gulf region investors as well as local businesses.
Dubai’s Financial Market General Index was among the world’s best performers, jumping more than 64 percent early on in the year, but by the beginning of December things had cooled with a gain of over nine percent.
It was a similar picture for Abu Dhabi, which at one stage was up by more than 25 percent before easing to gains of a little over four percent near the end of the year.
In Egypt the EGX 30 index added more than 45% over the year as the political situation there began to stabilize.
Two factors created market volatility. Geopolitical tensions in Libya, Syria and Iraq led to concerns of a regional war involving ISIL, causing all markets to tumble.
And slumping oil prices hit major companies’ shares, reversing the year’s gains. The dramatic fall in the cost of crude fueled fears of slowing economies and budget deficits throughout the Gulf.
For an insight into what lies ahead for Middle East Markets Dahleen Hassan interviewed Nour Eldeen Al-Hammoury of ADS Securities.
“Bearing in mind both geopolitical events and the sharp decline in oil prices, what’s your assessment of the down side risks to the markets next year?”
“The region’s reserves and the potentials are likely to keep the region attractive to some investors. The Middle East markets were one of the best performing markets in 2014 but, they are not anymore. We believe that the decline could be limited as history showed before despite the fact of the current geopolitical tensions, which also had only a limited effect on the region and on the markets here in the Middle East
“Based on the financial data that you have, what is the investment forecast for the Gulf countries in 2015?
“The first opportunity is in Saudi Arabia and the UAE. Saudi Arabia is opening the door for foreign investors at the start of the year. The estimates are very high in terms of the liquidity that will be injected in the market. As for the UAE everyone knows that the UAE will be hosting the EXPO in 2020 so there are a lot of potentials ahead of this notable event. So we believe for now, these are the most interesting opportunities for the next year and the next few years as well.”