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Gulf markets pummelled by Wall St crisis

In a rollercoaster day for UAE markets, Dubai and Abu Dhabi witnessed sharp losses in early trading as foreigners pulled out in droves, but recovered late on as local investors resumed buying.

Global Financial markets were shaken to their core on Monday after US investment bank Lehman Brothers filed for bankruptcy protection and rival Merrill Lynch agreed to be taken over.
Asian and European stock markets tumbled on the news as the worries about Lehman counterparty risk and further financial market turmoil sent investors scurrying for safe havens such as gold.

Zaid Al Nafoosi, stock broker for Al Sharhan Stock Centre, described the news on the Lehman's bankruptcy as sending a “shockwave” through the region's markets.

“We don’t know the depth of the problem with Lehman Brothers... We don’t know their investments in our market, and we don’t know our investments in that bank," Al Nafoosi told Arabian Business.

Abdul Kadir Hussain, CEO of Mashreq Capital, said unraveling the region's exposure to Lehman "has only just begun and will continue for a quite a while".

“Lehman did active business in this region and I would suspect most financial institutions here would have some exposure to them across various asset classes including FX, rates, credit, structured products," Hussain said.

"But my sense is that these exposures would be very manageable for most institutions in the region.”

In the UAE the impact of the global crisis was exacerbated by bearish sentiment caused by fear of tensions with Iran, a real estate bubble and a widening corruption probe that has seen high profile arrests at banks and property firms.

Dubai's main index briefly slip more than 7 percent and Abu Dhabi's more than 5 percent, with bank and real estate stocks the hardest hit.

"Today’s bloodbath is in part a reaction by foreign investors on the news that Lehman is throwing in the towel,” Roy Cherry, vice president of research at the UAE's largest investment bank Shuaa Capital, told Arabian Business.

“Foreign investors in the UAE are currently dominated by hedge funds - this category converted into bearish mode this summer and has been net sellers ever since.

"However, what started off as one of the worst days I’ve seen in the local markets since the 2006 crash, appeared to be rebounding before market close."

Dubai market heavyweight Emaar Properties paced the early losses in the emirate, plummeting almost 14 percent - levels not seen since March, 2005 - before finally closing just 1.77 percent lower.

Deyaar Development finished down 1.28 percent and Union Properties down 1.06 percent, while Dubai Islamic Bank ended 4.13 percent down. All three had tanked around 10 percent earlier in the session.

The benchmark ended the day down 1.7 percent.

In Abu Dhabi, the benchmark closed 4.35 percent lower at 3,754 points, with losses led by Sorouh Real Estate and Aldar Properties.

Aldar and Sorouh both ended the day 6.8 percent lower, having been down close to 10 percent earlier in the day, while Abu Dhabi National Bank and Union National Bank both end down 9.4 percent.

Elsewhere in the Gulf, Qatar's benchmark plummeted more than 7 percent, Saudi fell over 6 percent and Kuwait dropped almost 4 percent.

Egyptian investment bank EFG-Hermes said in a note the recent strong sell-off "has left valuations at extremely compelling levels".

"Fundamentals remain intact and we expect robust earnings results to be announced this coming October," the investment bank said.

"As a result we believe investors should use the current period to strongly accumulate positions across the GCC, particularly the UAE, Qatar and Saudi Arabia."

Industries Qatar, Commercial Bank of Qatar and Qatar Islamic Bank led the drop in Qatar, closing 8.8 percent, 8.6 percent and 8.1 percent lower respectively.

The main index ended 7.06 percent lower at 8,216 points, its biggest one-day fall since Jan. 22.

Saudi Arabia's main index ended 6.49 percent lower at 7,255 points, the index's largest one-day fall since January.

Shares in Saudi Basic Industries Corp. (SABIC) and Saudi Fertiliser ended 6.3 percent and 10 percent lower respectively, while Al Rajhi Bank fell 5.8 percent.

In Kuwait the index closed 3.8 percent down at 12,360 points, with Mobile Telecommunications Co. (Zain) ending 5.95 percent lower and Kuwait Finance House and National Bank of Kuwait finishing down 4.35 percent and 4.88 percent respectively.

Oman's main index closed lower, reversing earlier gains that bucked the Gulf Arab region's downward trend and took the benchmark up more than 2 percent at one stage.

The index ended 0.16 percent lower at 8,181 points, with Bank Muscat and National Bank of Oman closing 3.4 percent and 5.4 percent lower respectively.

Bahrain's benchmark finished the day 0.79 percent lower at 2,499.11 points.

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