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RIYADH, May 22 (Reuters) - Firmer oil prices and the return of slight optimism in global bourses may help lift Gulf stock markets on Monday, while a surprise interest rate hike in Egypt may hurt that market.
Brent crude oil price were trading at $53.93 per barrel up 0.6 percent from the last close as OPEC-led supply cut may not only be extended into next year but might also be deepened to tighten the market and prop up prices. With the holy month of Ramadan starting next week, volumes in Gulf markets could languish as investors unwind certain positions, especially in stocks whose valuations are stretched, or keep long term allocations intact, leaving little room for markets to swing significantly in either directions.
At a meeting of its Monetary Policy Committee, the Egyptian central bank hiked its overnight deposit rate to 16.75 percent from 14.75 percent and its overnight lending rate to 17.75 from 15.75 percent, confounding the expectations of economists who forecast rates were unlikely to change. Local traders may now chose to exit positions in stocks and instead park their money in higher interest bearing and safer deposits at the bank. Meanwhile companies that carry a large chunk of debt may be hurt, as now higher interest expense weighs on their bottom line, while those that are consumer driven sectors may also come under pressure as people tend to spend less in a higher interest environment. (Reporting by Celine Aswad; Editing by Saeed Azhar)