15/10/2018 07:45 AST

Saudi Arabia’s Tadawul index tumbled 7 per cent on Sunday, extending the global sell-off after threats of sanctions from the US president Donald Trump. The Tadawul index fell as much as 7,001.94, or 7.02 per cent on the day, before trading 4.64 per cent lower at 7,223.56. The index has shed more than 5.15 per cent in the past week or so.

“Saudi market is likely reacting to the events over the weekend. Such steep correction for the past two sessions would likely have triggered margins calls and stop losses that can exaggerate the decline,” Nishit Lakhotia, head of research at Sicobank said. Out of the 188 listed companies, shares of 182 fell. Traded value stood at 5.5 billion Saudi riyals, compared to 4 billion riyals in the previous session.

Energy and materials index led the decline with more than 5 per cent losses in the overall gauge. Saudi Basic Industries Corp. closed 5.34 per cent lower at 110 riyals. Al Rajhi Bank closed 0.96 per cent lower at 82.10 riyals.

There could be an opportunity for traders after 12 per cent decline on the index since last week. “I think this sell-off offers an excellent time to buy beta blue chip names that will be a beneficiary of MSCI and FTSE inclusion. While markets can be volatile in the immediate few trading sessions, I expect Tadawul to trend higher towards end of the year and also remain strong in 2019’s first half, led by actual foreign fund flows,” Lakhotia said.

Current weakness meant that the Tadawul index has almost wiped off its gains accumulated so far in the year. Shiv Prakash, senior analyst with First Abu Dhabi Bank Securities, concurred. “Long-term investors may take advantage of the current market weakness and as we form a clear reversal pattern, may buy select strong fundamental stocks from the banking and petchem sector,” Prakash said.

Sunday’s sell-off in Saudi Arabia started to impact UAE markets during mid-morning session, as traders resorted to selling in local markets to meet the margin requirements in Riyadh.

The Dubai Financial Market (DFM) general index closed 1.50 per cent lower at 2,713.93. Dubai Islamic Bank and Emaar Properties were the worst hit. DIB closed 1.90 per cent lower at Dh5.15, while Emaar Properties closed 2.46 per cent lower at Dh4.76. Salama Insurance continued its gaining streak despite weakness in overall markets.

The downside was limited in Abu Dhabi Securities Exchange (ADX) general index due to support from First Abu Dhabi Bank and Etisalat. The ADX index closed 0.74 per cent lower at 4,931.14. Etisalat closed 0.06 per cent higher at Dh16.6. Elsewhere in the Gulf, the Muscat MSM 30 index closed 0.17 per cent higher at 4,497.36.


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