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Gulf stocks barely move before Saudi budget

Gulf stock markets barely moved in quiet, early trade on Thursday before the announcement of Saudi Arabia’s 2017 state budget, expected in the afternoon.

The Saudi stock index edged up 0.1 percent in the first 40 minutes. Much activity focused on second-tier stocks such as Saudi Printing and Packaging, up 4.9 percent, although Saudi Electricity rose 0.9 percent.

Saudi Electricity’s profits rose in the wake of the 2016 state budget, which raised utility fees as well as domestic fuel prices. The company reported a 50.8 percent jump in third-quarter net profit.

The 2017 budget is expected to include some further energy price hikes, though it is not yet clear whether these would include electric utility fees.

Dubai’s stock index fell 0.4 percent, Abu Dhabi was down 0.1 percent and Qatar lost 0.2 percent, dampened by a 1.8 percent pull-back by its largest bank, Qatar National Bank.

Most Gulf markets have seen low trading volumes in recent days because some investors are already on the sidelines for the New Year holiday period. 

Sources familiar with budget planning told Reuters on Thursday morning the government would reveal substantial progress in cutting the budget deficit from a record high in 2015, and that state spending would be raised in 2017 to support economic growth.

This would be positive for the stock market, but many investors may wait to buy stocks until they see details of austerity policies in the budget. Domestic energy prices are expected to be increased to ease the government’s subsidy burden, but it is not clear whether this will merely affect domestic fuel prices or also prices of natural gas feedstock, which would be negative for petrochemical producers.

Low trading volumes in most Gulf markets in recent days suggest some investors are already on the sidelines for the New Year holiday period.

The global market environment is neutral to slightly negative, with MSCI’s broadest index of Asia-Pacific shares outside Japan down 0.5 percent and oil prices having slipped moderately overnight.

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