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Tue 25 Sep 2012 11:21 AM

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Saudi declines seen limited; Kuwait's political woes resurface

Saudi Arabia made its largest one-day drop in 11 weeks on Monday

Saudi declines seen limited; Kuwait's political woes resurface

Persisting global growth concerns will keep Gulf investors cautious on Tuesday but steady oil prices are seen limiting declines in Saudi Arabia.

The kingdom made its largest one-day drop in 11 weeks on Monday as slumping oil prices and jittery global markets spurred nervy investors to cut risk. Most other local bourses also declined.

Brent crude is flat at $109.78 per barrel at 0550 GMT, as escalating tensions surrounding Iran offset concerns about weak demand in a still-fragile global economy.

"Downside might be limited today--Saudi's drop was a bit excessive and lacked a particular catalyst, suggesting that it may be a buying opportunity for the next leg up," says Sleiman Aboulhosn, assistant fund manager at Al Masah Capital.

"However, we're continuing to see very strong correlation between Saudi and crude oil prices, so any sell-off in the commodity will add significant downward pressure on markets."

Elsewhere, Kuwait's bourse closed at a three-month high in the previous session on optimism the government is using funds to diversify wealth, but fresh protest political unrest may hurt the positive market sentiment.

Thousands of Kuwaitis held a protest rally late on Monday ahead of a court decision on an electoral law they fear could weaken the chances of opposition candidates in the next parliamentary vote in the major oil-producing state.

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