Almost every Middle Eastern stock index declined on Sunday after oil, the region’s main source of income, sank to the lowest in seven years, damping the outlook for government spending.
Dubai’s DFM General Index ended its longest winning streak in almost three months, sliding 1.5 percent, the most in a week, to close at 3,026.05. Emirates NBD PJSC’s 4 percent retreat was the biggest contributor. The Tadawul All Share Index in Saudi Arabia lost 1.6 percent, also the most in seven days. The kingdom boosted its crude exports in October.
The retreat reflects the crunch countries in the Gulf are feeling as the plunge in oil curbs government revenue. Kuwait and Qatar said they will issue debt to cover rising budget deficits, even as bank liquidity is drying up and some central banks in the region raise borrowing costs in line with the Federal Reserve. The six-member Gulf Cooperation Council, which includes Saudi Arabia and the United Arab Emirates, is home to about 30 percent of the world’s oil. Saudi Arabia, the Arab world’s biggest economy, may announce next year’s budget this week.
“I don’t recommend buying anything in the market at the moment because oil hasn’t bottomed yet and global markets are still weak,” said Hisham Khairy, the Dubai-based head of institutional trade at Mena Corp. Financial Services.
Brent crude, a pricing benchmark for half the world’s oil, dropped to $36.88 a barrel on Friday after an increase in the number of oil rigs in the US signaled the glut that has sent prices tumbling will be prolonged. The S&P 500 last week posted its biggest two-day drop in more than three months and the Stoxx 600 fell as investor concerns over global growth resurfaced.
A Bloomberg index of the leading 200 stocks in the region declined 1 percent on Sunday, the most in a week.
Saudi Arabia increased crude exports in October to the highest level in four months, as the world’s biggest oil exporter added barrels to a worldwide glut. Income from oil accounts for more than 80 percent of Saudi Arabia’s revenue.
Al Rajhi Bank, one of the world’s largest Islamic lenders, was the biggest contributor to the Tadawul’s decline. The shares fell 3.5 percent, the most since Oct. 1, as government deposits retreated this year.
“Given that the Saudi budget announcement is expected tomorrow, investors will either look to book short-term gains or simply remain on the sidelines until after the announcement,” Nayal Khan, the Riyadh-based head of institutional equities sales trading at Saudi Fransi Capital, said by email.
Dana Gas was the most-traded stock in Abu Dhabi after it said it will get 50 percent of its claims in a settlement with RWE AG. The Sharjah, UAE-based energy producer is seeking to recover more than $1 billion in overdue payments from governments in Egypt and Iraq for fuel sales.
Dana Gas’s cash balance should jump more than $500 million within the next one-to-three months, and it may be debt free within the next six-to-12 months, Ghassan Chehayeb, chief investment officer at Texas-based Sancta Capital Group Ltd., said in emailed comments.
The shares rose 11 percent, the most since November 29, to 50 fils. The company was one of eight gainers on Abu Dhabi’s ADX General Index, which rose 0.2 percent.
Kuwait’s SE Price Index slipped 0.9 percent to the lowest level since July 2004. The government will proceed with plans to privatise the exchange in April, selling a stake to Kuwaiti and foreign institutions.
Bahrain’s gauge retreated 0.2 percent to the weakest level in more than two years. Oman’s MSM 30 Index decreased 0.1 percent. Qatar’s stock market was closed for a public holiday.
Egypt’s benchmark EGX 30 Index rose 0.6 percent, its fifth day of gains, matching its longest winning streak since October. Commercial International Bank Egypt SAE led advances with a 2 percent increase. The country’s biggest publicly traded lender said Thursday it will allow a company controlled by billionaire Naguib Sawiris to conduct due diligence on its investment banking unit after receiving a buyout offer of about 1 billion Egyptian pounds ($128 million).
“When a savvy investor such as Sawiris is buying local investment banks, it shows the industry may be regaining some of its lost allure,” said Wafik Dawood, a money manager at Cairo-based Compass Capital. “It’s a positive signal for investors, especially for foreigners.”