Investors wary over US-Turkey dispute

Arabian Gulf stocks fell yesterday, pressured by general weakness across emerging markets as investors steered clear of assets perceived as risky due to a diplomatic and economic row between the United States and Turkey.

The Turkish lira plunged last week after US President Donald Trump doubled tariffs on Turkish steel and aluminium imports. On Friday, the lira fell 18 per cent to a record low.

Other factors, such as the reintroduction of US sanctions on Tehran, as well as the diplomatic dispute between Saudi Arabia and Canada, added further pressure to the markets.

The Turkish crisis weighed the most on the Qatar market. The index, which fell 2.6 per cent, was pulled down by Commercial Bank and blue-chip Qatar National Bank, which dropped 4.1 per cent and 4.7 per cent, respectively – the two worst performing stocks in the Qatari exchange yesterday.

QNB owns Finansbank in Turkey and Commercial Bank has a majority stake in Turkish lender Alternatifbank.

In Saudi Arabia, the index fell 1.4 per cent, below its 100-day average for the first time this year. It closed at 8,065 points, the lowest since late May.

Banks were mostly down, led by National Commercial Bank, which fell 3.2 per cent on concerns about its exposure to Turkish assets. Al Rajhi Bank dropped 1.3 per cent.

Despite yesterday’s sell-off, “Mena equities remain under-represented in global portfolios and are thus less exposed to global EM outflows”, said Sanat Sachar, equity research analyst at Al Mal Capital.

“GCC equities are pegged to the US dollar, and are thus insulated from the EM local currencies turmoil. This means that some asset allocators could even consider the GCCs as an EM safe haven.”

According to Mr Sachar, further turmoil in Turkey could exacerbate the differential between Mena equities and other emerging markets.

In Dubai, where the index shed 1 per cent, Air Arabia was down 2.9 per cent.

The company last week reported a 24 per cent drop in second-quarter profit. The low cost airline, which in June disclosed an exposure of $336 million to private equity group Abraaj said in its financial statement for the first half of 2018 that a short-term investment of Dh275m in Abraaj had not been repaid after maturing at the end of June.