Reopening Of Economies In The MENA Region Is Likely To Provide A Better Assessment Of The Real Impact Of The COVID-19 Pandemic

Global equities recorded an optimistic performance during the week, largely supported by positive economic indicators, rise in jobs and jump in pending home sales, outweighing the concerns of surge in infection cases. The first half of 2020 has been a roller coaster year so far for the equity markets, dropping sharply in February and March and then rising steadily through April and May. However, the ride is expected to be less bumpy during the second half of the year but the market narrative can change rather quickly as observed during the first half of 2020.

For the region, 5 out of the 7 regional indexes closed in red, while 2 indexes closed in green. The region has underperformed the global equities during the first half of the year, which can be attributed to uncertainty around the oil prices and production cuts, coupled with domestic factors influencing investor confidence.

During the week, Dubai was the worst performing index regionally with losses of 1.2%, followed by 1.16% in Egypt, 0.41% in Kuwait, 0.40% in Oman, and 0.39% in Bahrain. On the other hand, Saudi Arabia was the best performer with gains of 1.10%, followed by 0.61% in Abu Dhabi.

Global economies are showing early signs of recovery, widely expected post the reopening of economies, especially supported by the initial pent up demand from consumers. However, sustainability of improvement in economic data and consumer confidence during the next two quarters will be an important catalyst to push the markets to new highs over the course of 2020.

For the MENA region, the reopening of economies is likely to provide a better assessment of the real impact, which will allow investors to differentiate the winners and losers from the COVID-19 pandemic. More importantly, this could be an opportunity for investors to pick quality stocks that could consolidate their position and emerge stronger and bigger from the pandemic.