Slump in oil may weigh on Gulf, rate hike may hurt Egypt

CAIRO - 9 July 2017 : A sharp decline in crude oil prices is likely to drag on Gulf stock markets on Sunday, while a surprise interest rate hike may weigh on shares in Egypt.

International benchmark Brent crude settled down 2.9 percent at $46.71 a barrel on Friday, after falling to $46.28 earlier that day, its lowest in more than a week.

Shares of large-cap polypropylene maker Advanced Petrochemical - the first Saudi company to report second-quarter earnings - may outperform its peers after it posted a better-than-expected net income of 194 million riyals.

Analysts at Riyadh-based NCB Capital had expected the firm to report a net income of 133 million riyals ($35.47 million).

"We believe higher-than-expected gross margin led to the variance ... which is due to higher operational efficiency following the shutdown in Q1 2017," said NCB Capital, referring to an eight-day maintenance shutdown at one of its facilities.

Advanced Petrochemical's revenue rose 10.5 percent to 604 million riyals from the year-ago period.

At a meeting of its Monetary Policy Committee, the Egyptian central bank raised the overnight deposit rate to 18.75 percent from 16.75 percent and its overnight lending rate to 19.75 from 17.75 percent, after hiking them by 200 points each at the last policy-setting meeting in May.

Nine out of 10 economists polled by Reuters on Monday predicted the bank would leave its key interest rates unchanged.

"As the news was very unexpected, retail investors are likely to cash out and put their money in time deposits, where they are now getting higher returns on their money," said a Cairo-based broker.

Shares of Arabia Cotton Ginning may get a boost after an Agriculture Ministry spokesman on Saturday said Egypt aimed to double production of cotton and to increase the price of the long staple cotton to more than 3,000 Egyptian pounds ($168.07) per qintar (160 kg), which will all be exported. ($1 = 3.7498 riyals)