RIYADH: Arab stock markets recorded a positive performance in January for the second consecutive month, mirroring the upward trajectory of global exchanges.

According to the latest Arab Monetary Fund report, the gains came after markets worldwide rebounded from the declines observed in December, driven by improving investor sentiment, monetary policy adjustments, and strong corporate earnings in key industries.

In January, the global uptrend was reflected in Arab stock markets, with major indices such as MSCI and the UK’s FTSE posting strong gains.

The report stated that the composite index for Arab financial markets increased by 0.97 percent at the end of January, reflecting broad-based improvements across regional exchanges. 

The positive sentiment was fueled by a combination of factors, including rising corporate profits, enhanced liquidity conditions, and policy measures aimed at strengthening market stability and attracting foreign investment.

Regional market performance

Casablanca’s stock exchange emerged as the top performer among Arab markets in January, with its index surging by 9.98 percent. This was followed by strong performances on the Kuwaiti and Amman bourses, which recorded gains of 5.73 percent and 5.11 percent, respectively. 

The Saudi, Tunisian, and Abu Dhabi markets also posted solid gains, rising by 3.15 percent, 2.69 percent, and 1.77 percent, respectively. 

Meanwhile, Egypt, Qatar, Palestine, and Dubai registered more modest gains of less than 1 percent, respectively.

Three Arab stock exchanges experienced declines. Bahrain Bourse saw a 5.36 percent fall, Iraq Stock Exchange dropped by 1.8 percent, while Muscat Securities Market fell by 0.73 percent.

Key drivers of market gains

One of the primary factors driving the positive performance in Arab stock markets was the robust financial results posted by listed companies, particularly in the banking sector. 

Many financial institutions across the region reported strong earnings for the end of 2024, which significantly boosted investor confidence and contributed to the stock market rally.

Global and regional central banks played a crucial role in supporting financial markets by maintaining accommodative monetary policies. Several central banks in the Arab region, including those in Saudi Arabia, the UAE, and Qatar, reduced interest rates to stimulate economic activity. 

Similarly, major international central banks, such as the US Federal Reserve and the European Central Bank, signaled a shift toward looser monetary policy to counter slowing economic growth and ease inflationary pressures. These moves improved market liquidity and encouraged risk-taking among investors.

In an effort to attract foreign investment, Arab stock exchanges intensified their market development initiatives. Many bourses focused on improving governance, enhancing transparency, and simplifying regulatory processes to facilitate foreign capital inflows. 

Structural reforms, such as digitalization of trading platforms, improved disclosure requirements, and the introduction of new financial instruments, contributed to increasing market attractiveness.

Strong performances in key sectors like banking, real estate, telecommunications, pharmaceuticals, and technology helped drive growth in Arab stock markets.

The surge in these industries contributed to broad-based market gains. Additionally, the insurance and consumer goods sectors saw increased activity, reflecting growing investor confidence in long-term economic stability.

Trading activity and market liquidity

Despite overall market gains, trading values across Arab stock exchanges recorded a mixed performance in January. The total value of traded stocks declined slightly by 2.96 percent compared to December. 

However, some markets showed strong growth in trading activity. The Palestinian market recorded the highest surge in traded value, jumping by 261.4 percent. 

The Kuwaiti and Amman stock exchanges followed with gains of 31.8 percent and 20.6 percent, respectively. 

The Saudi, Qatari, and Abu Dhabi markets also registered healthy increases in trading value, ranging from 12.3 percent to 19.6 percent.

Conversely, markets in Dubai and Egypt experienced declines, with decreases of 2.6 percent and 23.3 percent. The market in Muscat also fell 32.8 percent.

The largest drop was observed in the Tunisian market, which saw a 71.7 percent decline in traded value.

The total market capitalization of Arab financial markets increased by 0.60 percent at the end of January, adding approximately $26.28 billion in value compared to the previous month. 

The biggest contributors to this growth were Bourse de Casablanca, which rose by 10.17 percent, followed by Amman Stock Exchange with a gain of 7.55 percent. 

Kuwait Stock Exchange recorded an increase of 5.73 percent, while Tunis’s stock market and the Egyptian bourse saw growth of 2.93 percent and 2.76 percent, respectively.

On the other hand, Iraq’s market capitalization dropped by 2.42 percent, Beirut’s by 5.01 percent, and Bahrain’s by 5.36 percent.

Arab markets in a global context

Arab stock markets followed the global trend, where major indices posted strong gains in January. 

The MSCI Latin America Index rose by 9.37 percent, while the MSCI Europe Index increased by 8.42 percent. 

In France, the CAC 40 advanced by 7.72 percent, and in the UK, the FTSE 100 gained 6.13 percent. 

The Dow Jones saw gains of 4.70 percent, while Nasdaq rose by 1.64 percent and the S&P 500 increased by 2.70 percent.

In contrast, Japan’s Nikkei index declined by 0.81 percent, while the MSCI Asia Index showed marginal growth of 0.60 percent. 

Additionally, the MSCI Emerging Markets Index for the Arab region increased by 3.21 percent, highlighting the region's resilience in a recovering global economic environment.

Interest rate developments and economic outlook

Central banks worldwide adjusted their monetary policies in response to changing economic conditions. 

The US Federal Reserve held its interest rate steady at 4.50 percent to 4.25 percent following three consecutive cuts in 2024, reflecting a cautious approach to inflation management. 

Meanwhile, the European Central Bank and the Bank of China reduced their rates to support economic growth. 

In the Arab region, interest rate cuts in Saudi Arabia to 5 percent, the UAE to 4.4 percent, and Qatar to 5.1 percent, helped enhance liquidity and investor sentiment.