Emerging markets lead Gulf stocks lower

Saudi Arabia’s main stock index fell below major technical support for the first time this year yesterday, leading declines in Middle East stocks as the region was swept up in a broader emerging markets sell-off.

Investor sentiment was gloomy across emerging markets, with the MSCI EM index down 1.3 per cent as a result of worries about a potential escalation in the US and China trade conflict and the health of emerging markets such as Turkey and Argentina.

Saudi Arabia’s stock index dropped 3.9 per cent in late trade, falling below its 200-day average for the first time this year. The index closed 3.1 per cent down.

“With foreigners selling off on the back of the emerging markets worries, margin calls were triggered in Saudi,” said Marie Salem, director of capital markets at FFA Dubai.

Blue-chip names which have surged in recent months on expectations of foreign fund inflows were hard hit, with Saudi Basic Industries Corp closing 4.4 per cent and Al Rajhi Bank falling 3 per cent.

The latest monthly Reuters poll of Middle East fund managers in August found many were becoming much less positive on Saudi Arabia because of rich valuations and broader emerging market concerns.

Investors also fretted about a retreat in oil prices, with Brent crude, the global benchmark, falling 0.98 per cent to $77.44 a barrel by 1252 GMT.

Egypt’s main index slipped 1.1 per cent, with real estate investment firm Talaat Mostafa Group Holding Company declining 2.3 per cent.

First Abu Dhabi Bank, the largest bank in the United Arab Emirates, acted as the biggest weight on Abu Dhabi’s index, dropping 2.8 per cent.

Abu Dhabi Commercial Bank dropped 4.6 per cent. It said on Monday it was in early merger talks with Union National Bank and separately with unlisted Al Hilal Bank.

UNB added to double-digit gains on Tuesday to rise a further 11.7 per cent, reflecting analysts’ expectations that it will gain the most from a potential merger.

The Abu Dhabi stock index fell 1.1 per cent.

In Dubai, Emaar Properties was the main drag on the index, with the stock falling 1.8 per cent.

The emirate’s index slipped 0.7 per cent.