DUBAI, Dec 15 (Reuters) - Stock markets in the United Arab Emirates and Qatar fell early on Thursday after the U.S. Federal Reserve raised interest rates and hinted at the risk of a faster pace of tightening next year, but Saudi Arabian banks bucked the market downtrend.
As expected, the central banks of Saudi Arabia, Kuwait, Bahrain, the United Arab Emirates and Qatar followed with their own 25 basis point rate hikes while Oman, which has been raising its repo rate gradually in recent months, is expected to continue doing so.
But since market interest rates in the Gulf have recently been influenced more by oil price and their impact on banking system liquidity than by official policy rates, the latest increases may not have much negative impact on economies.
In Dubai, where it is more vulnerable to foreign fund flows than its regional peers, the main index pulled back 0.5 percent. Heavyweight Emaar Properties and its retail affiliate Emaar Malls Group were each down 1.1 percent.
Dubai depends heavily on tourism and a stronger U.S. dollar, which is linked to the UAE dirham via a peg, could slow that sector.
Qatar's main index was down 0.6 percent, pulling further away from a two-month high hit earlier this week. Telecommunication shares listed on the MSCI emerging market index were down with Ooredoo declining 1.1 percent.
In Saudi Arabia, however, bank shares gained, leading the main market index 0.5 percent higher after 50 minutes of trade. All of the 12 listed lenders climbed with heavyweight Al Rajhi Bank adding 2.0 percent.
The 25 basis point rise in Saudi Arabia's reverse repo rate, used when banks deposit funds with the central bank, could boost their income modestly. At the same time, the central bank kept its repo rate, used to lend money to banks, flat in a sign it does not want liquidity to tighten further. (Reporting by Celine Aswad; Editing by Andrew Torchia)