Saudi falls 7%, Dubai down 4.6% as Iran plans oil-export boost

Stocks across the Middle East tumbled as the easing of sanctions against Iran raised the prospect of a surge in oil supplies
(AFP/Getty Images)
By Bloomberg
Sun 17 Jan 2016 01:58 PM

Stocks
across the Middle East tumbled as the easing of sanctions against Iran raised
the prospect of a surge in oil supplies to a market already reeling from the
lowest prices in more than a decade. Shares in Tehran gained.

Saudi
Arabia’s Tadawul All Share Index dropped 7.2 percent as of 2:02 pm in Riyadh
to its lowest level since March 2011. Abu Dhabi’s ADX General Index fell into a
so-called bear market. The Bloomberg GCC 200 Index, which tracks 200 of the
six-nation Gulf Cooperation Council’s biggest companies, traded at 9.4 times
estimated 12-month earnings, the lowest in almost seven years. Iran’s TEDPIX
Index climbed 0.9 percent, according to data on the bourse’s website, extending
Saturday’s 2.1 percent advance.

Iran,
home to almost 10 percent of the world’s proven oil reserves, is starting
preparations to boost exports after the United Nation’s nuclear agency on
Saturday said the country has complied with the terms of an international
agreement to curb its nuclear program. That threatens to put further pressure
on prices, hurting the oil-dependent economies of the GCC.

"Iranian
oil supply will come to the market as early as today or tomorrow," said
Nayal Khan, the Riyadh-based head of institutional equities sales trading at
Saudi Fransi Capital. "The market’s recovery will depend on whether we can
get oil back above $30."

Iran
is targeting an immediate increase in shipments of 500,000 barrels a day, Amir
Hossein Zamaninia, deputy oil minister for commerce and international affairs,
said on Sunday. It plans to add another half million barrels within months.

Concern
that Iran may exacerbate the global supply glut sent Brent crude, a benchmark
grade for more than half the world’s oil, to a new 12-year low on Friday,
helping to spur a global stock rout. The Standard & Poor’s 500 Index fell
to the weakest level since August 25 in the worst start to a year for US equities
on record. Emerging-market stocks posted a third straight weekly decline,
dropping to the lowest level since 2009.

The
countries of the GCC account for about 30 percent of the world’s proven oil
reserves.

Saudi
Arabia’s Al Rajhi Bank and Saudi Basic Industries Corp., one of the world’s
largest chemicals manufacturers, were the biggest contributors to the drop on
the Tadawul, losing 5.7 percent and 6.4 percent, respectively.

The
gauge has tumbled 36 percent over the past year as the slump in oil has hurt
company profits linked to government spending. Oil revenue accounts for more
than 70 percent of the kingdom’s income.

Saudi
Arabian Fertilizer Co. retreated 6.4 percent to the lowest level since November
2009 on a closing basis after its fourth-quarter net income halved to 379
million riyals ($101 million). Yanbu National Petrochemical Co. slumped 7.4
percent to the lowest level since May 2009. The company’s fourth-quarter profit
dropped 36 percent.

“Most
companies are likely to report results this week and this can certainly
influence short term direction," said Muhammad Faisal Potrik, the head of
research at Riyad Capital. "However, if we look at dividend yields and
expectations of oil prices one year out, some of the stocks are very
attractively priced and long-term investors are unlikely to suffer losses if
they start investing here."

The
Tadawul’s 14-day relative strength index fell to 15 on Sunday, the lowest level
since August on a closing basis. A reading below 30 suggests to some analysts
that a security may be oversold.

The
Bloomberg GCC 200 Index plunged to the weakest level since March 2011 as every
benchmark gauge in the region fell.

“Oil
breaking below $29 oil price has urged more investors to sell," said Talal
Touqan, the head of research at Abu Dhabi- based Al Ramz Securities.

Qatar’s
QE Index tumbled 7.2 percent, the most since December 2009, and Abu Dhabi’s ADX
General Index slumped 4.2 percent to the lowest level since November 2013. It
has declined 23 percent since a peak in July. Dubai’s DFM General Index lost
4.6 percent in the highest trading volume this year.

Oman’s
MSM 30 Index fell 3.2 percent, the most since December 2014, and Kuwaiti stocks
also lost 3.2 percent to the lowest level since May 2004. Bahraini equities
slipped 0.4 percent.

While
Saudi Oil Minister Ali Al Naimi is optimistic that market stability will
return, it will take time, he said at a news conference in Riyadh on Sunday.

Iranian
shares rose to the highest level since August, according to data on its
website. The nation is seeking to attract at least $30 billion in foreign
direct investment over the next five years, President Hassan Rouhani said in a
televised speech.

“Investors
shouldn’t look at Iran to make a quick buck but rather invest with a long-term
view to benefit from the best- performing market of the next five years,"
Ramin Rabii, the chief executive officer of Turquoise Partners, a Tehran-based
investment company, said on Saturday. “We expect the Iranian economy to grow at
a rate of 6 to 8 percent for several years.”

Revenue
from oil will act as a “supplementary income" for the country, Rouhani
said.

Egyptian
equities extended losses after its worst week since the Arab Spring. The EGX 30
Index fell 2.6 percent to the lowest level since October 2013. That takes its
decline since the start of the year to 19 percent, the most among more than 90
gauges tracked by Bloomberg after Shanghai’s stocks.

“Local
investors are panicking because of the selloff in Gulf markets after oil’s drop
last week," said Tamer Ismail, the head of dealing at Cairo Capital
Securities. "Low oil prices should be positive for us, but people are
ignoring that rationale and exiting the market while they still can.”

The
most populous Arab country is a net importer of crude and stands to save on its
fuel subsidies bill with lower oil prices. Stock losses prompted the bourse to
urge companies on Thursday to expedite the release of their 2015 results to
ease "unjustified panic."

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