Saudi plunges to 35-month low as oil drop fuels rout

MIDEAST STOCK MARKETS

Saudi Arabia’s benchmark index tumbled to a 35-month low yesterday and Dubai and Egypt’s benchmarks hit their lowest closes of 2015 as a renewed slump in oil prices spurred a region-wide sell-off. Saudi’s benchmark fell 2.9 percent to its lowest finish since Jan. 1, 2013 to take its losses this year to 17.4 percent.

Oil made its biggest weekly decline in eight months last week and US Light Crude fell 5.1 percent on Thursday and Friday alone, the latter declines coming after regional bourses last traded. The sustained slump in oil prices has hurt state finances in the Gulf along with earnings in the important petrochemical sector. “Gulf markets have been in a bearish mode for quite a while now; today’s declines were triggered by the latest drop in oil prices,” said Shakeel Sarwar, head of asset management at Securities & Investment Co (SICO) in Bahrain.

“Third quarter earnings have not been helpful either,” he said, forecasting Gulf markets’ earnings would fall 10-15 percent on average in 2015 based on results for the first nine months of the year.

Saudi Basic Industries Corp (SABIC) and fellow petrochemical producers Saudi Kayan each dropped 3 percent. Almost all sectors declined in a broad sell-off. The banking index lost 2.7 percent. “Investors are now realising oil prices won’t recover any time soon,” Sarwar said.

Construction stocks headed losers as Dubai’s index fell 3.7 percent to its lowest close since mid-December 2014 Drake & Scull plunged the maximum daily limit of 10 percent to an all-time low after the contractor reported a third-quarter net loss of 985 million dirhams ($268.18 million).

Builder Arabtec dropped 9.3 percent to take its losses to 85 percent from a May 2014 high, since when several senior management have left. It has reported widening losses in the past four quarters including a thirdquarter loss of 944.8 million dirhams last week.

In Abu Dhabi, Etisalat dropped 1.6 percent as traders booked profits after MSCI said it would include the telecom operator in its emerging market index from November-end.

Etisalat’s shares had gained 29 percent since June when the former monopoly said it would allow foreigners and institutions to own its shares, a prerequisite to join the index. In Egypt, the main index fell 4.2 percent to a 23-month low as losers outnumbered gainers 26 to one. — Reuters