Saudi Stocks Plunge as Mideast Markets Retreat Amid Oil Slump

20/01/2016 14:06 AST

Saudi Arabian stocks led a retreat among Middle East equity markets as Brent crude dropped below $28 per barrel for the second day this week.

The Tadawul All Share Index fell 4.5 percent, headed for the lowest since March 2011 on a closing basis, as Saudi authorities were said to have ordered local banks to stop offering options contracts that allow speculators to take bets on a devaluation of the riyal. Dubai’s DFM General Index tumbled 4.6 percent to the weakest close since September 2013. The Bloomberg GCC 200 Index, which tracks the region’s largest companies, was poised for the lowest level since 2011.

“Fear’s in the air,” said Ahmed Shehada, the Dubai-based executive director for advisory and institutions at NBAD Securities LLC, the brokerage arm of one of the United Arab Emirates’ biggest bank. “Any chance of a recovery has been quickly clouded by oil dropping again and by the global selloff.”

The declines came as emerging-market equities slid Wednesday to the lowest level since 2009 as Chinese shares in Hong Kong slumped amid heightened concern that global economic growth is faltering. Volatility among stocks of the six-nation Gulf Cooperation Council is climbing as investors weigh the impact of oil prices at the lowest in 12 years against some of the cheapest share valuations since 2011.

Brent crude, a benchmark for half the world’s oil, fell 2.6 percent to $28.01 per barrel at 2:04 p.m. Dubai time, heading for the lowest close since November 2003. It sank to $27.77 a barrel on Wednesday.

Saudi Arabia, which relies on crude for about 70 percent of government revenue, next week plans to raise as much as 20 billion riyals ($5.3 billion) in its first local debt auction of the year, two people with knowledge of matter said on Wednesday.

Riyal-forward contracts for the next 12 months rose 35 points and were headed for the highest level in four days. The Saudi Arabian Monetary Agency has ordered banks in the kingdom to stop dealing in options contracts, according to five people with knowledge of the matter, as it seeks to curb speculation on its currency.

Qatar’s QE Index lost 2.3 percent, Oman’s measure slipped 1.8 percent and Bahrain’s gauge retreated 0.6 percent. Kuwait’s SE Price Index slumped 2 percent and Abu Dhabi’s ADX General slid 3.1 percent.

Egypt’s EGX 30 Index tumbled 4.5 percent. Israel’s TA-25 Index was heading for the weakest finish since October 2014 as it fell 2 percent.

Bloomberg