Bear attack on Gulf equities
The Dubai Financial Market General Index plunged seven per cent to 3,452.5 points on Sunday, its lowest close since March 30.
Dubai - Markets plunge on global cues, spearheaded by lower oil prices, global selloff
By Abdul Basit/Chief Reporter
Published: Mon 24 Aug 2015, 12:00 AM
Last updated: Tue 25 Aug 2015, 9:48 AM
Bears took control of Gulf bourses on Sunday in the wake of lower oil prices and Friday's global selloff of capital markets.
The Dubai Financial Market General Index plunged seven per cent to 3,452.5 points, its lowest close since March 30. Its neighbour, the Abu Dhabi Securities Exchange, recorded a 5.01 per cent decline and closed at 4,286.49 points.
Other Gulf countries also followed the bearish mood. Saudi Arabia's Tadawul index lost 6.86 per cent, Qatar's main benchmark finished down 4.7 per cent, Oman's Muscat Stock Market witnessed a 2.94 per cent decline and the Kuwait Stock Exchange suffered a 2.36 per cent loss. Bahrain also declined, but it was the only market that lost below one per cent at 0.37 per cent.
Oil prices plunged to their lowest level in more than six years on Friday, closing the day at $45.46 a barrel. The Dow Jones Industrial average also recorded its biggest loss in four years on Friday, closing down 3.1 per cent on growing fears over China's slowing economic growth.
"The multiple fears of China slowing down, a currency war, reduced oil-related income for regional governments to spend and a growing US economy not being strong enough to withstand these new threats does not make for a pretty picture," Dubai-based Al Masah Capital said.
Talking about the oil price slump, Ramez Merhi, director at Al Masah Capital, said: "Regional economies could slow significantly if these prices are sustained."
"Valuations are becoming attractive, especially in Saudi Arabia and the UAE, but these now need to be taken in context of a rapidly changing economic environment," Al Masah added.
West Texas Intermediate traded as low as $39.86 per barrel before closing at $40.45 on the New York Mercantile Exchange. WTI may decline to $32 on a persisting global surplus, according to Citigroup.
At the DFM, traders exchanged about 340 million shares, around 14 per cent more than the 12-month average. Share prices of 18 stocks suffered a 10 per cent decline at the DFM. A total 37 stocks traded and 34 declined.
Active stocks Emaar Properties lost 8.3 per cent, Arabtec dived 9.6 per cent, Damac Properties slid 9.6 per cent, Deyaar Development plunged 9.97 per cent and Drake and Scull fell by 9.7 per cent Gulf Finance House, Union Properties, Dubai Investments and Emaar Properties emerged as the top trading stocks with 70.8 million, 45 million, 30 million and 29.9 million shares changing hands, respectively, at the Dubai bourse.
At the Abu Dhabi Securities Exchange, 30 companies' stocks lost value out of total 34 traded at the market. The top-trading stocks include Aldar Properties with 84.3 million, Abu Dhabi Commercial Bank with 68 million, First Gulf Bank with 54.7 million and etisalat with 32.6 million.
Saudi equities were poised to enter a bear market in Riyadh after the index fell 23 per cent from a recent peak. Fitch Ratings on Saturday cut the outlook on the nation's AA debt rating to negative from stable, indicating its next decision may be to lower its assessment.
"The Saudi market is taking a cue from global markets and oil prices, which fell further on Friday," Muhammad Faisal Potrik, the head of research at Riyad Capital, told Bloomberg. "Weak economic data from China and the US, and Fitch revising Saudi Arabia's outlook to negative is not helping either. The combination of those matrices will reflect negatively on Saudi stocks initially this week, but we'll have to see how oil prices perform toward the end of it."