(MENAFN- The Peninsula) Major Middle Eastern stock markets plunged in relentless selling yesterday because of sliding oil prices, a decision by Fitch Ratings to cut its outlook for Saudi Arabia's debt, and Friday's sharp losses on Wall Street.
Qatar Stock Exchange (QSE) index dropped 595.53 points, or 5.25 percent, when the bourse closed trading at 10,750.00 points yesterday. The daily turnover increased to QR414.72m with a volume of 9,434,325 shares from 5,915 deals compared to QR375.32m with a volume of 7,766,317 shares from 6,638 deals on Thursday. Indices of all sectors ended in red yesterday.
Telecoms index dropped 7.16 percent to 896.68 points. Real estate index decreased by 6.90 percent to 2,480.14 points and consumer goods and services index declined 6.38 percent to 6,362.67 points. QSE Total Return index decreased by 5.25 percent to 16,709.32 points, QSE Al Rayan Islamic Index lost 6.5 percent to 4,131.60 points and QSE All Share Index dropped 5.20 percent to 2,875.12 points. Of the 43 companies listed on QSE, investors exchanged shares of 40. Of them, one gained, 37 went down, two unchanged.
Dubai suffered its biggest one-day fall since last December, with its main index tumbling 7 percent to 3,451 points, its lowest close since March 30. The index finished just off the intra-day low and close to major technical support on the March low of 3,233 points.
Saudi Arabia's benchmark lost 6.9 percent to 7,463 points, nearing support on its December low of 7,226 points.
That brought its losses so far this month to 18 percent - a drop which has erased some $75bn of market value. "There was no discrimination in the selling - it was across markets, across sectors, across names," said Sebastien Henin, portfolio manager at The National Investor in Abu Dhabi.
He noted that even stocks in traditional defensive industries such as telecommunications and food were hit hard in the Gulf. "That was a bit worrying."
The major Gulf oil exporting states have huge fiscal reserves which will allow them to prevent cheap oil from damaging their economies for years. Nevertheless, the fact that a clear base for oil prices has still not emerged is spooking investors.
Their jitters were magnified by Fitch lowering its outlook for Saudi Arabia's foreign and local currency issuer default ratings to "negative" from "stable", citing cheaper oil, while affirming the ratings at 'AA. Standard & Poor's cut the kingdom's outlook to negative in February; the third major rating agency, Moody's, has not yet taken such action.
Most bankers and economists in the region think Riyadh is very unlikely to favour the risky step of breaking the riyal's peg to the US dollar, and believe the scale of it foreign reserves mean it won't be forced into such a measure for many years at least.
But one-year US dollar/Saudi riyal forwards have jumped to their highest levels since 2003 in the last few days as banks have hedged against the risk of the peg breaking - further alarming the equity market. One-year dollar/riyal forwards were quoted at 340 points, their highest level since March 2003 and up from a previous close of 310 points, as some banks used the market to hedge against the risk of riyal depreciation. A fresh fall in oil prices in recent days, China's decision to devalue the yuan this month and concern about the health of its economy, and general turmoil in emerging markets have increased concern about Saudi Arabia.
The United Arab Emirates has a more diversified economy than Saudi Arabia and is fiscally stronger. But it, like other markets around the region, is vulnerable to a pull-out of Saudi money if Riyadh slumps.
Henin said it was difficult to identify support for the Gulf markets in their current mood and it might require a stabilisation of oil prices and big foreign equity markets, and therefore an easing of worries about China's economy, for selling in the Gulf to dry up. When that happens, there may be substantial buying back of stocks in markets such as the UAE, where valuations have reached attractive levels, he said. The UAE is trading near 11 times this year's projected corporate earnings - reasonable in historical terms and compared to other emerging markets. More than 10 Dubai stocks plunged by their daily 10 percent limits yesterday, including builder Arabtec. Top real estate developer Emaar Properties sank 8.3 percent.
In Saudi Arabia, petrochemical producer Saudi Basic Industries Corp lost 9.1 percent, miner Ma'aden was down 9.8 percent and Alinma Bank sinking 5.9 percent.
Abu Dhabi's index fell 5 percent to close at 4,286 points and Egypt's stock index dropped 5.4 percent to 6,784 points. Although Egypt's economy should benefit from low oil prices, it receives aid and investment from the Gulf.
The Kuwait index fell 2.4 percent to end the day at 5,909 points, while the Oman index dropped 2.9 percent to close at 5,911 points. The Bahrain index fell 0.4 percent to 1,315 points.
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