Gulf Markets Weaken on Falling Oil Prices

SHAFAQNA – Stock markets in the Gulf closed sharply lower Sunday as tumbling oil pricessparked concerns about the economic growth prospects for the crude-exporting region.

Saudi Arabia and its Gulf neighbors are among the biggest sellers of oil globally, using billions of dollars in revenue from hydrocarbon sales to bolster local economies.

But the Organization of the Petroleum Exporting Countries—of which Saudi Arabia is the de facto leader—decided late last week to maintain crude output levels, which means a glut in the market is likely to remain and keep oil prices at multiyear lows.

“Investors, especially international, are reassessing their [Gulf] regional exposure amid sharply weaker oil,” said Mohammed Ali Yasin, managing director at Abu Dhabi-based NBAD Securities. “The concern obviously is that lower oil [prices] will curb the governments’ ability to spend locally and grow the economies.”

Saudi Arabia’s Tadawul, the Middle East’s biggest market, led the regionwide selloff—the kingdom’s benchmark index fell 4.8% to 8624.89.

Dubai shares fell 4.7% to 4281.43, Abu Dhabi’s market slipped 2.6% to 4675 and Doha’s benchmark index shed 4.3% to 12,760.46.

“Led by Saudi, which is completely correlated to the collapse in the oil price, all regional markets took another leg down,” said an analyst at Al Masah Capital. “Saudi’s sharp decent into a bear market cannot be ignored by the rest of the markets; in many instances it is Saudi money moving out of U.A.E. and Qatar markets that is further precipitating the regional decline,” the analyst said.

Stock markets in Qatar and the United Arab Emirates are among the top performers globally this year on the back of strengthening local economies, with investor interest boosted by their elevation to emerging status by index compiler MSCI Inc. in May.

Saudi Arabia itself has benefited from strong buying after the authorities there announced plans to open the local market to direct foreign investment early next year. But a slump in oil prices triggered a strong bout of profit-taking in the past few months.

From a 12-month perspective, “…we are more circumspect about the future of oil prices and expect equity markets in the GCC to gyrate more or less in lock step with sentiment in the market for crude oil,” Arjuna Mahendran, the chief investment officer at Dubai-based Emirates NBD, told clients in a note.

Saudi petrochemical companies were among the top losers. Sabic, one of the world’s largest petrochemical producers, fell nearly 10% to SAR88.25 ($23.51). Amanat Holdings, which made its debut on the Dubai bourse, was also caught in the selloff, closing 12% below its issue price at AED0.88 (24 U.S. cents).

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