Share prices in the energy-rich Gulf states tumbled to multi-year lows yesterday after oil prices closed the week below $38 a barrel, the lowest in seven years. The slide was led by markets in the United Arab Emirates and Saudi Arabia, which plunged below key resistance points amid a sell-off by concerned investors.
Crude prices nosedived Friday, with Brent dropping 4.5 percent to $37.93 a barrel and West Texas Intermediate losing 3.1 percent to $35.62 a barrel. Gulf states, which pump over 18 million barrels of oil per day, heavily depend on crude income for public revenues. Brent crude posted its biggest weekly percentage drop in over a year after the International Energy Agency (IEA) warned global oversupply of crude could worsen next year. The Kuwait Stock Exchange dropped 0.93 percent to 5,633.28 points, a three-year low. It has lost 13.8 percent on the year. Saudi’s benchmark index plunged 2.7 to 6,764 points. It is down 32 percent from a 2015 peak of 9,897 on April 30.
“Low oil prices coupled with investors’ heightened nervousness about the kingdom’s budget has compounded volatility in the markets,” said Hisham Tuffaha, head of equity investments at Riyadh-based Mulkia Investments.
“Overall we are in a downtrend, for some sectors this is justified, especially oil-linked industries like petrochemicals, other segments such as banks this is less so.” Saudi Telecom Co (STC), the country’s biggest telecommunications company, dropped 1.9 percent, despite the Kuwaiti market regulator approving STC’s takeover plan for Kuwait’s Viva.
The retail sector was down 3.5 percent, with Saudi Company for Hardware (SACO) and Al Othaim losing 6.3 and 3.7 percent respectively. Recent retail data showed signs of weakness, as consumers are shopping less and cutting back on spending at stores, according to a note by Saudi’s NCB Capital.
“The slowing growth in sales transaction values is similar to the period during the global financial crisis and oil price declines in 2008,” NCB Capital’s note added.
The Saudi Tadawul All-Shares Index (TASI) dropped 2.65 percent to 6,764.60 points, its lowest close since November 2012. It has lost 18.8 percent since the start of the year. TASI, the largest Arab bourse, slid lower during the day but recovered before closing.
Dubai’s index fell 2.1 percent to 2,883 points. It is down 23.6 percent in 2015, making it the worst performing Gulf bourse this year. Emirates NBD – Dubai’s largest bank by market value – tumbled 4.1 percent, reversing earlier session gains. Dubai Islamic Bank fell 3 percent to 5.42 dirhams, a 2015 low. Arabtec retreated 3.7 percent, falling near a four-year low.
Abu Dhabi’s index dropped 2.1 percent as blue-chip Etisalat, the largest stock by market value, slid 2.5 percent. The telecom company is up 57.2 percent this year, which has helped limit the benchmark’s year losses to 11.7 percent.
Qatar Exchange, the second largest Arab bourse, shed 3.7 percent to close at 9,643.65 points, the lowest level since September 2013. It has shed 21.5 percent compared with last year. Financial sector heavyweights Masraf Al-Rayan and Qatar National Bank dropped 6.3 and 2.1 percent respectively.
Muscat Securities Exchange slid 0.66 percent to 5,414.99 points, a 12-month low, while the tiny Bahrain Stock Exchange dropped slightly. Gulf private companies are feeling the heat from government measures to cut capital spending on which they heavily rely. The decline in Gulf markets followed a global shares rout on Friday due to low oil prices.
Egypt’s bourse fell 3.7 percent to 6,395 points, within 93 points of November’s 2015 low. “The sell-off is part of the declines in other Middle East markets following a drop in oil prices,” said Simon Kitchen, head of regional strategy at Cairo’s EFG Hermes.
“The Egyptian market is uncertain about the central bank’s interest rate decision at the monetary policy meeting scheduled at the end of this week,” Kitchen added. Egypt’s annual urban consumer inflation rose to 11.1 percent in November from 9.7 percent in October, the official statistics agency CAPMAS said on Thursday. That is the steepest increase in headline inflation since June.
The higher inflation figures are unlikely to influence Thursday’s central bank meeting to set interest rates, analysts told Reuters, noting the main priority is likely to be promoting growth. Local and Arab traders were net sellers while foreign investors were net buyers, exchange data showed. Orascom Telecom and Commercial International Bank fell 7.3 and 4.2 percent respectively.