Low oil prompts investors to keep closer eye on Dubai, Saudi shares

dubai — Dubai equities are tracking moves in Saudi shares the least closely in more than three years as the drop in oil prices prompts investors to pay more attention to local factors driving the two markets.

The correlation between the benchmark indexes in Dubai and Saudi Arabia was at the lowest level since May 2014 earlier this week, signalling that diverging factors are on the minds of traders in Riyadh and the UAE.

The markets tend to be more in lockstep when oil prices are either high or at multi year lows, times when the value of a barrel of crude dominates investors’ decisionmaking, said Joice Mathew, the head of equity research at United Securities in Muscat.

Right now, investors are weighing the relative strengths — and weaknesses — of each economy, Mathew said.

There is a mix of reasons for the current picture, “ranging from the relative oil dependence of the respective economies, the perceived risk in the market from an oil-price crash and the nature of investors present in the market during the bearish period” of even cheaper crude, Mathew said.

The stock benchmarks in Dubai and Riyadh are lagging developing countries this year. The DFM General Index has dropped almost 5.5 per cent, after a 12 per cent advance in 2016.

Saudi Arabia’s Tadawul All Share Index, on the other hand, is down 4.5 per cent, erasing last year’s gains of 4.3 per cent.

The MSCI Emerging Markets Index, meanwhile, has climbed 17 per cent.