Brexit vote seen to have limited impact on MENA markets

The impact of the Brexit referendum on markets in the Middle East and North Africa (MENA) region will likely be limited, though stocks are expected to remain volatile in line with global equities ahead of the June 23 vote, according to analysts.

“The GCC asset markets can only stand and watch as global events unfold,” Gary Dugan, chief investment officer at Emirates NBD, wrote in a note to investors.

“The DFM (Dubai Financial Market) for example has largely traded sideward since March. Should global equity markets fall sharply, then local markets could be dragged down with the DFM facing a break below 3200, to 3000, and at worst 2600,” he added.

MENA markets will be among the last to react to the Thursday vote, which decides whether Britain stays in the European Union (EU). The results will come in much after the region markets close for the weekend, giving investors here two days to study the outcome.

“By the time of the Sunday open – markets are likely to gap up or down, depending on the vote result,” said Simon Kitchen, head of strategy research at EFG Hermes.

“Volumes and prices may fall towards the end of this week as investors take some money off the table ahead of the referendum results – Abu Dhabi banks may be an obvious candidate for profit taking as the week wears on,” he added in a note.

The weakening of the British pound, following a vote in favor of Brexit, could make the UK a more attractive destination for Gulf investors, but “investors are likely to stay at bay for a time, while the dust settles,” National Bank of Kuwait said in a research note.

Oil prices, meanwhile, could face downward pressure if Britain opts to leave the EU, as the ongoing political uncertainty is likely to affect demand, Kitchen of EFG Hermes added. 

Write to Nadeshda Zareen at nadeshda.zareen@argaamplus.com