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MIDEAST STOCKS-Qatar, Gulf may stabilise but Qatari banking sector still a risk
June 7, 2017 / 5:47 AM / 4 months ago

MIDEAST STOCKS-Qatar, Gulf may stabilise but Qatari banking sector still a risk

DUBAI, June 7 (Reuters) - Qatar’s stock market may stabilise on Wednesday after two days of steep declines as some investors buy shares in companies with attractive valuations, but uncertainty over pressure on Qatar’s banking sector could limit any rebound.

Qatar’s stock index has now plummeted 8.7 percent to 9,059 points, its lowest close since January 2016, since Monday when Saudi Arabia, the United Arab Emirates and Bahrain cut diplomatic and transport ties, accusing Doha of backing terrorism.

“From a vaulation perspective, there is now a good buying opporunity in some companies,” one regional brokerage firm told its clients.

Since the start of the crisis, non-Qatari Gulf shareholders - who often make up between 5 and 10 percent of the market’s turnover - and foreigners have have been exiting positions faster than usual, according to Qatar bourse data.

Qatar’s huge financial reserves mean it can probably avoid a crippling crisis, but many parts of its economy, from tourism to merchandise trade and banks which obtain funding from elsewhere in the Gulf, may be hit.

The Saudi Arabian, UAE and Bahraini central banks have not yet clarified how they want commercial banks in their countries to handle business ties with Qatar, which involve substantial cross-border lending, deposits and syndicated loans.

If the commercial banks are advised to get rid of their Qatari assets in a short timeframe, or if authorities act against Qatari banking assets in their jurisdictions, that could provoke retaliation by Doha and turmoil in the Gulf banking and money markets.

In the meantime, fund managers said that Qatari government- related entities may step in to support the market.

Many Qatari companies - especially banks including Qatar National Bank and Doha Bank - are consituents of several emerging market benchmarks, so many foreign investors cannot ignore them.

“Overall, it still boils down for investors (abroad) that it is still an oil story – with oil at $45-50, most of the countries will be able to muddle through, and I think another collapse below $40 would raise risks more,” said Win Thin, global head of emerging market currency strategy at Brown Brothers Harriman in London.

Other stock markets in the Gulf may trade sideways on Wednesday as Brent oil prices have flattened out near $50 a barrel and MSCI’s broadest index of Asia-Pacific shares outside Japan has crept up 0.1 percent.

Some buying of Saudi stocks, in anticipation of a decision by MSCI on June 20 to begin reviewing Riyadh for possible inclusion in its emerging market index, may continue. (Reporting by Celine Aswad; Additional reporting by Karin Strohecker; Editing by Andrew Torchia)

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