Saudi Arabia’s anti-corruption purge and deepening feud with Iran have spurred a selloff across Gulf stock markets to the tune of almost $7 billion in three days, a sign of the volatility to come as governments in the region push ahead with reforms.
The decline cut the combined market capitalization of bourses in the six-nation Gulf Cooperation Council to $910.7 billion, the lowest level in a year, according to data compiled by Bloomberg.
The Saudi crackdown, which included the arrest of a string of princes and billionaires on Saturday, has spread worries among investors over who might be next.
Meanwhile, the surprise flight to Riyadh and subsequent resignation of Lebanese Prime Minister Saad Hariri, who cited Iran and Hezbollah as one of the reasons why he’s stepping down, has raised concern that proxy conflicts between regional superpowers will worsen.
It’s “a reminder that the neutral space available to countries in the region, caught between rival projections of power from Iran and Saudi, is shrinking,” Hasnain Malik, the global head of equity research at Exotix Capital in Dubai, wrote in a note to clients. “Apart from Lebanon, this negatively affects Kuwait, Oman, Qatar and Pakistan.”
The biggest decliner among GCC markets this week is that of Kuwait, which has fallen $3.37 billion, followed by bourses in the United Arab Emirates and Qatar, which have each dropped by about $2.6 billion.
Saudi Arabian stocks have gained $1.96 billion, a sign to some analysts that state funds are propping up shares. Oman’s market also climbed, adding $91 million.
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