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Gulf markets hit by fears of global slowdown

Gulf markets were hammered on Sunday with Abu Dhabi and Saudi continuing their losing streak and Dubai posting its largest single-day loss in over three months as fears of a global slowdown spooked investors.

Indexes in the UAE took their cue from the US and UK where markets ended the week on a sour note on Friday.
The Dow Jones Industrial Average, Nasdaq, S&P 500 and the FTSE all slumped on fear the US Federal Reserve may be unable to contain the fallout from the subprime debacle.

Dubai’s main index plummeted 2.88% to 5,248.88 points on the back of heavy losses from property giant Emaar and Dubai Financial Market Company. The two fell 3.56% and 6.64% respectively to drag the index into the red for a third straight day.

Emaar, the largest Gulf company by market capitalisation, strongly influences the Dubai Financial Market (DFM) and a dip in its share price can drag the entire index down with it.

“Emaar is leading the way [down] right now,” Mohanad Yousef, accounts officer at Dubai Financial Brokerage told ArabianBusiness.com, adding that “we usually see a rebound when the price drops to 10.85”.

Over 23 million shares of the property developer changed hands on Sunday with the trend generally being to the downside.

Adding to the woes, many international investors, which provide around one third of the total liquidity on the DFM, are winding down profitable positions in emerging markets to cover losses suffered at home, according to Yousef.

“We are seeing foreign investors sell positions to make up for losses abroad,” he said.

The DFM said foreign investors sold 2.07 billion dirhams worth of shares last week.

“We are not seeing a lot of fresh capital being injected into the market,” Blair Look, head of asset management at Al-Mal Securities, told newswire Bloomberg. “Earnings might be the next catalyst."

But despite Dubai’s poor performance, there may be some value in the market, according to Yousef, who sees oversold stocks as presenting attractive opportunities for bargain hunters.

“Markets both here [Dubai] and in Abu Dhabi represent good value for investors… stocks are very cheap historically right now,” he said.

In Abu Dhabi it was Sorouh Real Estate and telecom provider Etisalat that dragged the exchange down.

Sorouh struggled to hold back an exodus from its stock after founding shareholders of the third-largest UAE property developer are allowed to sell their shares starting today, after market regulators agreed to end a lock-up period.

The developer plunged 6.27% while Etisalat slid 2.04%, sending the benchmark down 1.34% to close on 4,602.56 points.

Saudi’s Tadawul All Share Index was also hard hit, shedding 1.3% after being down as much as 2.1% during the day.

Saudi Basic Industries Corporation (Sabic) and Al Rajhi Bank led the losses falling 2.82% and 2.66% respectively. A string of losses in the Gulf’s largest market takes this year’s performance to negative 19%, the worst of the GCC field.

The benchmark closed the day on 9,051.37 points.

Kuwait eased slightly lower also, led by losses in the banking and services sectors. The main index finished the day down 0.03% on 14,328.2 points. It is the fifth loss in six days since reaching an all time high after the announcement of parliamentary dissolution.

Bank Muscat and Raysut Cement pushed Oman’s benchmark to a second successive loss, falling 2.13% and 3.69% respectively. Oman dropped 0.88% to 10,039.86 points, although it still sits on more than 11% of gains this year.

Qatar and Bahrain provided the only silver lining in an otherwise glib day for Gulf investors, both inching higher with banks leading the way.

Bahrain broke a four day losing streak to finish higher on the back of gains from Ahli United Bank and investment bank Investcorp. The two led the way to rise 0.81% and 0.04% respectively. The index climbed 0.45% to 2,793.64 points.

Qatar National Bank and Qatar Gas Transport posted gains of 0.68% and 0.63% respectively to nudge Doha’s benchmark 0.32% higher to close on 9,659.46 points.

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