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Mideast markets drop 36% in two months

Middle East and North African (MENA) economies are struggling amid the global downturn with the region’s equity markets dropping 36 percent in the past two months, according to a new report.

Dubai-based investment bank Rasmala on Thursday said rising debt levels, dwindling investor confidence and slowing demand for property had hit local markets hard.
In October, equity markets across the Middle East and Africa dropped a record 22 percent. November registered a further 14 percent decline as part of a 55 percent drop in 2008.

“November can be seen as the month in which any lingering doubts about the effect of the global financial crisis on our region were finally dispelled,” a Rasmala report said.

“The near collapse of financial behemoth Citigroup, oil prices at levels below $50 a barrel, further evidence of cracks in some sectors of the Dubai real estate market, and investor and political turmoil in Kuwait all conspired to make the past month only slightly less painful than the record losses of October,” it added.

In Kuwait, investors obtained a court order to close the Kuwaiti Stock Exchange for one day last month after the market suffered losses.

Meanwhile, the Saudi government attempted to lay investors’ concerns to rest by insisting the kingdom’s fiscal position is sound. Its central bank SAMA reduced interest rates and reserve requirements to inject liquidity into banking and the equity market.

The report said measures, such as a huge government cash injection into the banking system in Dubai, led to slight improvements in the region’s equity market’s trading volumes towards the end of November.

But the Rasmala report warned: “Investor sentiment remains fragile however and it would take several weeks of relative stability before investors can feel that they have seen the worst and begin to take advantage of the extremely attractive valuations in MENA equity markets”.

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