Panic grips mar­kets; Gulf stocks un­der pres­sure


Mid­dle East stock mar­kets look set to re­main un­der down­ward pres­sure on Mon­day as oil prices hit fresh 6-1/2 year lows and Asian bourses slumped in what one Ja­panese an­a­lyst likened to the 1997 Asian fi­nan­cial cri­sis.

By some tech­ni­cal mea­sures, ma­jor Gulf mar­kets are very over­sold for the short term and ripe for a re­bound. Dubai's in­dex, which plunged 7.0 per­cent to 3,451 points on Sun­day in in­dis­crim­i­nate selling, is near ma­jor tech­ni­cal sup­port on the March low of 3,233 points, a log­i­cal place for a re­bound.

Saudi Ara­bia's bench­mark, which lost 6.9 per­cent to 7,463 points on Sun­day, bring­ing its losses this month to 18 per­cent, is near chart sup­port on its De­cem­ber low of 7,226 points. With an av­er­age for­ward price/earn­ings ra­tio of near 11 times, the UAE mar­kets are at­trac­tively val­ued in his­tor­i­cal terms. Even Saudi Ara­bia no longer looks ex­pen­sive. But the depth of the global mar­ket slide will make it hard for in­vestors to buy back Gulf stocks with any con­vic­tion.

MSCI's broad­est in­dex of Asia-Pa­cific shares out­side Ja­pan is down about 5 per­cent in Mon­day trade and S&P 500 mini fu­tures sug­gest Wall Street will open sharply lower. "Mar­kets are pan­ick­ing. Things are start­ing to look like the Asian fi­nan­cial cri­sis in the late 1990s. Spec­u­la­tors are selling as­sets that seem the most vul­ner­a­ble," said Takako Ma­sai, head of re­search at Shin­sei Bank in Tokyo.

Brent oil is down 2.1 per­cent to $44.52 a bar­rel, which may trig­ger fresh rises in U.S. dol­lar/Saudi Ara­bian riyal for­wards and Saudi credit de­fault swaps , adding to the jit­ters in Riyad's bourse.

Egypt low­ered its top tax rate and the thresh­old for com­pa­nies and in­di­vid­u­als in high in­come brack­ets on Sun­day and sus­pended a 10 per­cent tax on cap­i­tal gains. The mea­sures had pre­vi­ously been an­nounced but the fact that the gov­ern­ment has fi­nally gone ahead with them is likely to be seen as pos­i­tive by in­vestors, who had been con­cerned by the slow pace of re­forms.

How­ever, the news may for now fail to trig­ger any rally in Cairo given the poor global back­drop and wor­ries that slid­ing mar­kets in the Gulf may hurt Egypt's trade, in­vest­ment and aid ties with the re­gion.

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