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Lifting of UAE-Qatar restrictions brighten stock market prospects

The UAE’s decision to resume trade ties with Qatar is seen markedly improving investment prospects between the two countries, with investor optimism rising as stocks gained in both markets.

Major Gulf stock markets ended the first trading week of the New Year on a high and logged weekly gains as regional markets benefited from a rise in oil prices and an easing in trade restrictions with Qatar.

Lifting of trade and travel restrictions will help better trade, tourism and logistics between both countries, analysts at Standard Chartered evaluated in a note, with both markets set to benefit even further.

UAE property sector to benefit
With the UAE-Qatar bilateral trade resumption, analysts widely view that the real estate and construction sector in the UAE stands to profit, as Qatar gains further access to sectors in the emirates.

A rush of investments is eyed between the countries upon the borders and trade opening up again, which is a much-needed boost for the UAE infrastructure industry, which has many projects on hold.

There is pent up demand in Dubai’s property market, with real estate seen rebounding and buyers set to capitalise on low prices – making the latest developments viewed as aptly-timed for the fraught sector.

Stock markets, economies to profit
Qatar’s stock markets, sectors and economy stand to equally benefit as well. Standard Chartered now sees Qatar’s economy growing 3 per cent, revising upward its previous growth target of 2.1 per cent – higher than the 2.2 per cent forecast Qatar gave last month in its 2021 budget.

“The end of the blockade should encourage Gulf tourists back to Qatar when the pandemic eventually eases,” analysts Fitch Ratings wrote. “This should help reduce the pressure on the country’s distressed real estate and hospitality sectors, which are the largest sources of asset-quality problems for banks.”

Apart from this, and with new markets now opening in both Israel and Qatar, multiple Dubai-based analysts predict a “very” bullish UAE stock market during the ongoing first quarter with a rush of investors looking set to take advantage of new opportunities – a benefit that is seen from a business standpoint as well.

Qatar banking stocks to get boost
Qatari companies including banks are forecast to get a shot in the arm from a deal to end Doha’s row with Gulf States, analysts at Qatar National Bank’s Financial Services Research reiterated in a note.

The blockade led to the withdrawal of about $30 billion of non-resident deposits from Qatari banks in June-October 2017, predominantly by Saudi Arabian depositors but also by some from the UAE, causing tightening of foreign-currency liquidity, Fitch Ratings noted.

“We expect Saudi clients, who withdrew deposits from Qatari banks due to the blockade, to start shifting some of their funds back,” the analysts at Fitch Ratings further added, which will help improve view of banking stocks and sectors as well.

Investors in UAE, Qatar cheer move
While Qatar’s index concluded last week with a 2.3 per cent gain – helped by a near 1 per cent jump at the end of the week – the Gulf’s biggest lender Qatar National Bank rose 1.4 per cent on Thursday.

The past week saw investors cheer the breakthrough in Qatar’s over three-year diplomatic rift with Saudi Arabia and other GCC countries as Arab leaders gathered for a summit focused on ending a long-running dispute.

While Dubai’s blue-chip benchmark gained in four of the five sessions last week to post a weekly gain of 5.4 per cent, the Abu Dhabi index ended 2.4 per cent higher for the week. Dubai unveiled its fifth stimulus package, worth Dh315 million to counter the economic impact of the COVID-19 pandemic.

Moreover, another factor aiding both stock markets is the rising price of oil. Crude hit its highest since late February after a fall in US stockpiles added further support following Saudi Arabia’s unilateral decision to cut output.