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Tue 22 Jan 2008 07:21 AM

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Gulf markets plunge on US economic fears

Qatar and Dubai witness biggest one-day fall in over a year as investors sell out of markets.

Gulf Arab stock indexes plunged on Monday amid concern the US is heading for a recession, prompting investors to sell out of riskier markets such as Dubai, Qatar and Abu Dhabi.

Qatar's main index suffered its biggest one-day fall in 18 months, and Dubai's main index its sharpest in 14 months.

"Concerns of a US economic slowdown has pushed foreign institutions to realise profits in the Gulf Arab markets," said Sherif Abdelkhalek, dealing room manager at investment bank EFG-Hermes.

Foreign investors want to "balance their portfolios so they won't be overexposed with the decline in global equity markets", Abdelkhalek said.

US president George W. Bush last week said the world's largest economy - hit by a subprime mortgage crisis and an ensuing credit crunch - faced the risk of an economic downturn. That sent global markets tumbling on Monday.

Qatar's main index dropped 4.22% to 9,921.52 points, the biggest slide since July 16, 2006.

"There is profit-taking across the board in Qatar as foreign institutions are liquidating their positions here to cover losses they suffered in other markets," said Khalid Arram, financial analyst at Doha-based Group Brokerage.

In Dubai, the index fell 5.33% to 5,555.69 points, led by Emaar Properties, the largest Arab real estate developer by market value. Its stock declined 6.81%, the biggest fall November 5, 2006.

In Saudi Arabia, shares of Saudi Basic Industries Corporation (Sabic), the world's largest chemical firm by market value, plunged almost 8% to 181 riyals ($48.27), its lowest in more than a month.

Sabic missed fourth-quarter earnings forecasts and said the impact of the US mortgage crisis on the US economy had hurt demand for chemicals.

"I expect the petrochemical sector, especially Sabic, to lag behind now that there is a question mark over the future of petrochemical prices in case of a global slowdown," said Rami Sidani, vice president of asset management at Shuaa Capital investment bank in Dubai.

Saudi Arabia's main stock index extended declines into a second day, falling 3.36% to 10,338.09 points. Abu Dhabi and Kuwait also closed lower. Oman's main index was the only gainer in the world's largest oil-exporting region.

Oil prices slid by almost $2 to a six-week low, below $89 per barrel on concern about the US economy. (Reuters)

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