Most Gulf Arab share markets fell yesterday as concern about a weak global economy, sliding oil prices and declines in overseas equity prices caused buying interest to dry up.
A lack of major economic policy developments within the Gulf means the region’s markets may remain dominated by the global trend for some days at least, traders said.
In the longer term, the strength of domestic economies in Saudi Arabia, Qatar and Oman may stabilise those stock markets if oil prices bottom out. But now that investors have become bearish, markets in the UAE and Kuwait are seen as vulnerable to more losses.
Dubai’s index sank 2% yesterday to 1,442 points, its lowest close since February 2, and it may test January’s seven-year low of 1,301 points.
The benchmark hit a 16-month high on March 5, but some analysts think this surge was largely speculative rather than based on companies’ performance, and the market has since plunged 19%. It now stands only 7% higher than its level at the end of last year, and is down 77% from its 2008 peak.
“UAE markets are illiquid and tend to be volatile - even one seller can drive the market down,” said Shahid Hameed, Global Investment House’s head of asset management for the Gulf region. “Fundamentals have improved a little bit, but the early-year rally was too strong and driven by better-than-expected dividend announcements - a turnaround in the UAE hasn’t really happened.
Dubai’s bellwether Emaar Properties lost 4.1%, budget carrier Air Arabia dropped 2.8% and construction firm Drake & Scull fell 3.8%.
Abu Dhabi’s index slipped 0.6%, its seventh straight decline.
Saudi Arabia’s bourse was choppy yesterday, ending 1% higher, after the main index plunged 4.2% on Saturday, its largest daily drop in 10 months.
Traders said the market could easily slump further if oil prices continued to slide when global markets reopen today. Brent crude oil fell 7.7% in three trading sessions last week to end Friday at $98.43 a barrel, its lowest close since January 2011.
“Oil’s move made investors worry,” said Hesham Tuffaha, Bakheet Investment Group’s head of asset management. “Some people say stocks are oversold, but we might see more declines if Brent fails to rebound to above $100.”
In Kuwait, the main index suffered its largest drop since last August, losing 1.2%.
Telecommunications operator Zain fell 1.4% and Islamic lender Kuwait Finance House dropped 1.3%, with both blue chips now trading around 2009 levels.
Oman also slid, by 0.6%, as Bank Muscat fell 2.7% to its lowest level in more than two years. Shares in Oman’s largest bank are among the most widely held by foreign investors, and so are very sensitive to global market moves.
Elsewhere, Egypt’s index fell 1.3% to 4,626 points, while Bahrain’s measure slipped 0.1% to 1,138 points.
Kuwait inflation plunges to nine-year low
Kuwait's annual inflation rate fell to a modest 2.7 per cent in October - its lowest in nine years, despite robust consumer spending and some improvement in business sentiment, said a report.