Dubai hits 6-year low as Gulf markets slide

01/03/2011 00:00 AST

Dubai’s index tumbled to a six-year low and Oman made its largest drop in two years yesterday as widening protests in the sultanate and a steep drop in Saudi stocks a day earlier sparked a sell-off on Gulf markets.

Dubai index dropped 3.8% to its lowest finish since June 2004. Volumes hit a four-week high and were triple those of Sunday, indicating rising selling pressure.

“Aside from political factors, interest rates are rising and the cost of borrowing in the region is going up which is not good for banks and the overall economy,” said Eric Swats, head of asset management at Rasmala Investments.

Contractor Drake & Scull fell 9.6% and Emaar Properties dropped 6.3%.

“Events in Bahrain, Yemen and Oman broke the camel’s back - investors saw the market wasn’t going to rally, so thought it better to sell now and potentially buy back at lower levels in a couple of weeks time,” said a Dubai-based analyst who asked not to be identified.

Abu Dhabi’s benchmark fell 1.5% to 2,589 points.

Oman’s index fell 4.9% to a seven-month low in its biggest decline since January 28, 2009. Bank Muscat dropped 8.8% and Bank Sohar slid 8.6%.

Omani protesters demanding political reforms blocked roads to a main export port and refinery in Sohar yesterday and a doctor said the death toll from clashes with police had risen to six. The health minister said one person had died.

The Saudi index slipped 0.2% to a new nine-month low, recovering from a 1.9% intraday low, which may bode well for other regional markets. It fell 5% on Sunday, helping to spark Monday’s sell-off.

Some petrochemicals stocks rose, with a spike in oil prices likely to boost first-quarter earnings, but few traders looked that far ahead, said Youssef Kassantini, a Saudi-based analyst. National Industrialisation (Tasnee) added 1%.

“Saudi is very different to the rest of the region - its economy is much more solid than that of Egypt or Libya,” added Kassantini. “But fear is controlling traders, rather than fundamentals or rational analysis.”

Egypt’s market will re-open on Tuesday. It has been closed since January 27 after popular protests that ultimately ended former president Hosni Mubarak’s 30-year rule. Traders forecast many stocks will open at their maximum downward limit.

“If Egypt had re-opened immediately after Mubarak’s fall, there would have been a celebration rally, with people willing to buy from a trading perspective, before having to figure out how Egypt’s political situation will be resolved,” said Akram Annous, Mena strategist at Al Mal Capital.

“It would have been an easy buy, but we’re now more than two weeks later, the euphoria has passed and we don’t know what will happen to companies that benefited from their closeness to the former regime. Will there be reconciliation or a witch hunt?” Bahrain’s measure dropped 0.4% to 1,431 points.

Reuters