Banks support Saudi after Fed comments, Qatar cools

DUBAI - 21 September 2017: Banking shares lifted the Saudi stock index slightly higher in early trade on Thursday but Qatar’s index cooled after it had risen for two straight days.

The Riyadh index rose 0.2 percent after 20 minutes of trade as nine of the 12 listed banks rose after the U.S. Federal Reserve left interest rates unchanged on Wednesday but signaled it still expects one more increase by the end of the year.

Most Gulf currencies are pegged to the dollar and any monetary policy change in the United States is usually mimicked by Saudi Arabia, United Arab Emirates and Qatar. A rate hike is considered positive for banks because it lifts their interest rate margins.

For the banking sector as a whole the near term outlook looks slightly positive; analysts at Riyadh-based Alrajhi Capital said in a note on Wednesday that they expect net interest margins for the banking sector to improve in the third quarter and overall earnings to be “marginally higher”.

Qatar’s index was flat; it had risen 0.8 percent in the last two sessions. Banking shares were mixed with Qatar International Islamic Bank up 0.6 percent but Qatar National Bank down 0.2 percent.