The UAE market was the strongest Arab market in September as it gained 12.6% bringing its year to date gains to 53.6% and overtaking Egypt as the leading Arab market year to date. The UAE market rally was driven by the real estate and telecom sectors; with key players such as Emaar Properties gaining 16.7% and Etisalat and DU gaining 12.0% and 14.4% respectively.
Concerns over Saudi banks' exposure to the troubled Saudi firms had a negative impact on banks' share price performance in August as most listed Saudi banks experienced a decrease in their share price during the month. This trend was reversed in September due to the agreement that was reached between local banks and the Saad Group to settle its SAR 9.7 billion debt, and the market witnessed significant growth primarily from the banking and petrochemical sectors.
The poorest performing Arab market in September was Kuwait as it lost 1.2% bringing its year to date gains to a mere 0.4%. Confusion surrounding the acquisition of a 46% stake in Zain impacted the stock negatively as it fell 14.5% and became the main drag on the market.
Growth in banking and petrochemicals stocks brought the Qatar market's year to date gains to 7.7%. On the macro front, inflation fell by 0.8% in August and 3.6% since January 2009 mainly due to a decline in rents.
The Omani market gained 3.6% in September bringing its year to date gains to 20.8%. Bank Muscat was the main contributor increasing by 11.2% over the course of the month. The Omani Central Bank Governor expects the economy to grow by 1% to 2% in 2009. The Governor also reaffirmed the country's decision not to join the GCC monetary union.
The Egyptian market in September was the third worst performing Arab market gaining 0.5% and losing its position as the leading Arab market year to date to the UAE market. The Central Bank's interest rate cut of 25 bps was less than expected, negatively impacting the market performance in September. Investors had anticipated a 50 bps rate cut similar to that of the previous month. The financial sector was the best performing sector with CIB, EFG-Hermes and Pinoeers Holding gaining 6.0%, 5.3% and 2.8% respectively. Orascom Telecom declined by 4.1% in September, after an unsuccessful bid to acquire a 64% stake in Morocco's Meditel.
Economic indicators continue to improve. Egypt's net foreign reserves rose to USD 32.91 billion in August, from USD 31.63 the previous month. August inflation eased to 9.0% from 9.9% in July. Egypt's Investment Minister expects GDP growth of more than 5% in 2009/10 and a budget deficit to range between 7% and 7.5% of GDP for the current fiscal year.