Gulf Markets-Taking Stock: Key Views Update (EMM).

Gulf markets suffered fairly dramatic losses on Sunday and Monday, in line with global price action. That said, there are some positive signals from European markets this morning, Brent crude is back above the psychologically key US$50/bbl level (just), and the monthly charts of both global and MENA stock markets still show potential. We hold to our bullish views for now, but highlight key support levels. However, while we still like Abu Dhabi, Egypt and Qatar more than Oman and Bahrain, we now add Saudi Arabia to the latter group.

In spite of this week's losses, the Abu Dhabi Securities Market (ADSM) likewise remains within its short-term uptrend channel. The market closed on April 21 at 2,567, with technical support coming in at around the 2,500 mark; we would look for a break through this level to alter our short-term bullish stance.

If sentiment towards Abu Dhabi equities holds up, we could see a raft of IPOs towards the end of 2009. Tom Healy, chief executive officer of the ADSM recently told Bloomberg Television: 'We are told by bankers that there's something in the order of 40 that are committed to going public. The timing is something we can't predict because you have to have an improvement in the market and not just a temporary improvement.'

Saudi Arabia's Tadawul All-Share Index (TASI) has fallen below its upward trend channel, which is not a good sign, although it is likely a reflection of bad news for SABIC, the petrochemicals giant which is the biggest stock by market cap on the TASI. SABIC announced Q109 losses of SAR974mn yesterday. If the market can digest this news and bounce back by the end of the day, then the overall uptrend could resume. We would look for a strong close above 5,000 tonight, however.

For Egypt, which has been closed due to the Easter holiday, the losses on opening this morning have not been too dramatic, which is a good sign. The uptrend is in place, and there is additional resistance-turned-support at 4,800.

Focus On Qatar

Though Qatar's Doha Securities Market (DSM) has sold off heavily, falling 1.43% and 4.29% on April 20 and 21 respectively, it is still holding above short-term technical support. The DSM closed on April 21 at 5,273, while support comes in at around 5,250. Until and unless the index falls through this level, we remain bullish over the short-term time horizon. Looking further ahead, while there is still considerable uncertainty about the medium- to long-term direction of global, and particularly US equity markets, we remain as yet unconvinced that the DSM's low of 4,195 (in early March) will be remembered as the bottom of the bear market.

The banking sector appears to have stabilised following the combination of Qatar Investment Authority (QIA) equity injections, as well as the QIA's purchase of local banks' investment portfolios (which totalled QAR6.5bn across the sector). First quarter earnings reports painted an upbeat picture with the emirate's three biggest banks ( Qatar National Bank , Commercial Bank of Qatar and Doha Bank ) all posting year-on-year increases in net profit.

However, we continue to highlight the risks to the sector of a potential major real estate correction, which could in turn expose banks to heavy losses. The latest Banks Monthly Statement published by the Qatar Central Bank shows that in March, real estate loans did in fact contract nominally by 0.3% on a monthly basis - we view this as a positive development. However, real estate loans in March were equivalent in value to 18.0% of total deposits (an all-time high), and to 16.0% of total loans (down marginally from February's all-time high of 16.3%). In addition, at 112.6%, the composite loan-to-deposit ratio of the banking sector in March was still relatively high, especially considering the increased risks associated with lending in the current climate of global recession and domestic economic slowdown. In March, the loan-to-deposit ratio had in fact ticked up from February's figure of 110.1%, and is close to December 2008's historic high of 114.3%