Gulf markets tumble on Egypt contagion fears

Gulf stock markets tumbled yesterday as investors, rattled by turmoil in Egypt and concerns the unrest may spread, quit their positions to push indices to multi-week lows.

Egyptian protesters were on the streets again in central Cairo, demanding President Hosni Mubarak step down while security forces struggled to contain looters.

Egypt’s bourse was shut yesterday after falling 16% in two days last week. The Egyptian pound has fallen to six-year lows.

Dubai led regional declines as its index fell 4.3% to a 21-week low, with companies exposed to Egypt among the biggest losers.

“Equity premiums in the region are rising to take into account increasing political risk,” said Majed Azzam, AlembicHC real estate analyst in Dubai.

“Uncertainty is making foreign investors question their presence in our markets and there is indiscriminate selling, whether companies are exposed to Egypt or not.”

Emaar Properties, which has four major projects in Egypt including commercial and residential developments near Cairo, fell 8.3%. Azzam said about 10% of the Dubai developer’s assets were in Egypt. “Emaar is in 18 countries and Egypt is one of the important markets for the company,” Emaar said in a statement, adding it was monitoring the situation closely.

Builder Arabtec and contractor Drake & Scull, both active in the North African state, fell 6.7 and 8.3%, respectively.

UAE-based low cost carrier Air Arabia, which flies to four destinations in Egypt and operates a hub in Alexandria, fell 6.1%. It was the most active stock on Dubai’s index, accounting for more than a quarter of all shares traded.

“Our flights are operating normally but we had to adjust the timings of flights to ensure it operates outside curfew hours,” said Adel Ali, the chief executive of Air Arabia. “Any long-term comments would be premature right now. We are watching the situation closely and at present our hub operations are normal.”

Qatar’s index fell, but rebounded from an eight-week intraday low and like markets in Dubai, Abu Dhabi, Kuwait and Qatar, Doha’s bourse ended near its intraday peak, indicating some buyers returned following an initial sell off.

Oman fell 3%, Kuwait dropped 1.8% and Abu Dhabi lost 3.7%.

“There’s an assumption from foreign investors that unrest could spread to other countries in the region and that is risk they don’t want to participate in,” said Robert McKinnon, ASAS Capital chief investment officer.

“When everybody is scared, it is maybe a good time to take on risk, but there are so many permutations of what could happen politically in Egypt.”

Saudi Arabia’s index fell to a three-month low in initial trade, but subsequently rose to end 2.5% higher, rebounding following Saturday’s 6.4% drop, its largest in eight months.