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DUBAI, May 24 (Reuters) - Stock markets with higher exposure to China and other emerging markets may come under pressure on Wednesday although any negative impact may be short-lived and weak.
China's main stock index fell 1 percent after Moody's cut its sovereign credit rating on China. Asian shares also slipped, with MSCI's broadest index of Asia-Pacific shares outside Japan down 0.2 percent, despite modest gains on Wall Street overnight.
Moody's said growing leverage in China prompted the downgrade, and warned about slowing economic growth.
Although the impact of that downgrade on Gulf equities may be weak and indirect, a stronger dollar - which most Gulf states are pegged to - may hurt tourism from China and other emerging markets, especially to Dubai, one of the top tourist destinations.
Alternatively, emerging market funds may instead rotate into some of the undervalued stocks in the Gulf from Chinese shares. Dubai's index has been trailing most other emerging markets although some stocks are trading at a discount to their peers.
Meanwhile, Brent crude futures climbed back over $54 a barrel in Asian trade as confidence seeped back into the markets as an OPEC-led production cut aimed at tightening the market is expected to be extended until March 2018. OPEC will meet on Thursday in Vienna.
"Oil is back in the headline news... what is largely priced into both oil contracts and equities is the agreement of a nine-month extension; however, if there are any disagreements or on the flip side deeper tightening measures then markets here will react accordingly," said a Riyadh-based portfolio manager.
Reporting by Celine Aswad; Editing by Andrew Torchia and Biju Dwarakanath