Mideast stocks sink as oil at 2009-low sparks growth con­cerns

The Pak Banker - - INTERNATIONAL BUSINESS/SPORTS -

Dubai led a re­treat in Mid­dle Eastern stocks, ex­tend­ing last week's global sell­off, as crude's de­cline to a six-year low re­ver­ber­ated through a re­gion de­pen­dent on oil and gas ex­ports.

The DFM Gen­eral In­dex lost as much as 7.5 per­cent, and Saudi Ara­bia's Tadawul All Share In­dex was headed for a bear mar­ket af­ter de­clin­ing 5.9 per­cent at 2:56 p.m. in Riyadh. Qatar's QE In­dex fell 5.3 per­cent, while Is­rael's TA-25 In­dex lost 4.3 per­cent. Egypt's EGX 30 In­dex slid to the low­est level since Jan­uary 2014. Gauges in Abu Dhabi and Oman have de­clined more than 10 per­cent since a re­cent peak, the thresh­old for a mar­ket cor­rec­tion.

The slide in Brent crude, the bench­mark grade for more than half the world's oil, to be­low $45 a bar­rel for the first time March 2009 is piling pres­sure on Gulf states at a time when in­vestors are pulling out of higher-risk as­sets fol­low­ing China's de­val­u­a­tion of the yuan and grow­ing ex­pec­ta­tions that the U.S. will in­crease in­ter­est rates by year-end. The six-na­tion Gulf Co­op­er­a­tion Coun­cil is home to about 30 per­cent of the world's proved oil re­serves.

"There's in­dis­crim­i­nate selling across the board as re­gional mar­kets fol­low the sell­off in oil," Ramez Merhi, a Dubaibased di­rec­tor at Al Masah Cap­i­tal Ltd., which man­ages $500 mil­lion, said by email. "Re­gional economies could slow sig­nif­i­cantly if these prices are sus­tained." The MSCI Emerg­ing Mar­ket In­dex closed at the low­est level in six years on Fri­day as Brent fell to $45.46 per bar­rel and West Texas In­ter­me­di­ate traded as low as $39.86 per bar­rel be­fore clos­ing at $40.45 on the New York Mer­can­tile Ex­change. WTI may de­cline to $32 on a per­sist­ing global sur­plus, Cit­i­group Inc. said.

The Bloomberg GCC 200 In­dex, which tracks 200 stocks in the GCC, fell the most this year. Abu Dhabi's ADX Gen­eral In­dex de­clined 5 per­cent, tak­ing losses since a peak in July to 13 per­cent. Muscat's MSM30 In­dex lost 2.9 per­cent, down 12 per­cent from a high in Fe­bru­ary.

Dubai stocks edged closer to a bear mar­ket af­ter the in­dex sank 7 per­cent to close at 3,451.48, bring­ing its loss since 2015's peak to 18 per­cent. Traders ex­changed about 340 mil­lion shares on the in­dex, 14 per­cent more than the 12month av­er­age. Dubai-based devel­oper Emaar Prop­er­ties PJSC led the drop with an 8.3 per­cent slide to the low­est level since De­cem­ber.

The rel­a­tive-strength in­dex of Dubai's bench­mark gauge fell to 13, the low­est since De­cem­ber. The in­di­ca­tor posted a read­ing of less than 30 for the rest of GCC mar­kets, Egypt and Is­rael, in­di­cat­ing to some an­a­lysts that they're over­sold and may be poised to re­verse course.

Saudi Ara­bian eq­ui­ties were poised to en­ter a bear mar­ket in Riyadh af­ter the in­dex fell 23 per­cent from a re­cent peak. Fitch Rat­ings on Satur­day cut the out­look on the na­tion's AA debt rat­ing to neg­a­tive from sta­ble, in­di­cat­ing its next de­ci­sion may be to lower its as­sess­ment. "The Saudi mar­ket is tak­ing a cue from global mar­kets and oil prices, which fell fur­ther on Fri­day," Muham­mad Faisal Potrik, the head of re­search at Riyad Cap­i­tal, said from the king­dom's cap­i­tal. "Weak eco­nomic data from China and the U.S., and Fitch re­vis­ing Saudi Ara­bia's out­look to neg­a­tive is not help­ing ei­ther. The com­bi­na­tion of those ma­tri­ces will re­flect neg­a­tively on Saudi stocks ini­tially this week, but we'll have to see how oil prices per­form to­ward the end of it."

All but seven stocks in Saudi Ara­bia's 171-mem­ber in­dex fell, with Saudi Ba­sic In­dus­tries Corp., one of the world's largest chem­i­cals man­u­fac­tur­ers, lead­ing the slump with a 7.6 per­cent loss. The MSCI Emerg­ing Mar­kets In­dex last week slid be­low a trad­ing band that sup­port prices for the first time in four years, end­ing a pat­tern that tech­ni­cal an­a­lysts call a "chan­nel" in fa­vor of bears. The eq­ui­ties gauge, which ful­filled the de­scrip­tion of a bear mar­ket last week by drop­ping 20 per­cent from a peak, is head­ing for the worst Au­gust since 1998.

Con­cern over a global slow­down is gath­er­ing pace af­ter data out of China showed the na­tion's man­u­fac­tur­ing was at the low­est level in more than six years. The global eq­uity sell­off that sent gauges in Tai­wan, Brazil and In­done­sia into bear mar­kets is start­ing to show up in Is­rael, which was rel­a­tively un­scathed last week with a 1 per­cent de­cline. Is­rael's TA-25 In­dex slumped the most since Septem­ber 2011, led by Per­rigo Co.'s 4.6 per­cent drop.

"The panic has reached Is­rael," Tel Aviv-based Adi Ba­bani, a trader at Bank of Jerusalem Ltd., said by e-mail. "It's not as bad as other mar­kets around the world, but in­vestors are cer­tainly con­cerned about global eco­nomic growth be­cause Is­rael's econ­omy so heav­ily de­pends on in­ter­na­tional trade. Also, the Bank of Is­rael's in­ter­est rate de­ci­sion is to­mor­row, which is hold­ing back the declines as some ex­pect a cut."

Two of the sev­en­teen economist sur­veyed by Bloomberg forecast the coun­try's cen­tral bank will re­duce the base lend­ing rate on Mon­day from a record low of 0.1 per­cent. The re­main­der pre­dict no change. Is­raeli bonds rose for a third day, with the yield on the coun­try's 1.75 per­cent se­cu­ri­ties due Au­gust 2025 fall­ing three ba­sis points to 2.12 per­cent.

Egypt's bench­mark EGX30 In­dex re­treated 5.3 per­cent, led by Com­mer­cial In­ter­na­tional Bank Egypt SAE's 5.4 per­cent drop. The com­pany ac­counts for about 35 per­cent of the gauge. "The weak­ness in global mar­kets is hit­ting us, much like the Gulf," said Ashraf Akhnoukh, the man­ager for Mid­dle East and North Africa at Cairo-based CI Cap­i­tal. "But you have to add to that Egypt's own set of prob­lems, in­clud­ing repa­tri­a­tion of for­eign funds, no par­lia­ment and a de­clin­ing like­li­hood of get­ting aid from the Gulf as oil drops."

The North African coun­try's cen­tral bank has lim­ited ac­cess to for­eign cur­rency and placed re­stric­tions on out­ward trans­fers since the on­set of the 2011 Arab Spring in or­der to cope with a short­age of dol­lars re­sult­ing from the slump in tourism and for­eign in­vest­ment.

The Egyp­tian pound is one of the world's most vul­ner­a­ble cur­ren­cies to a pos­si­ble de­val­u­a­tion fol­low­ing Kaza­khstan's de­ci­sion Thurs­day to weaken its tenge, ac­cord­ing to John-Paul Smith, the ex-Deutsche Bank AG strate­gist who pre­dicted Rus­sia's 1998 cri­sis and this year's China rout.

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