GCC markets dip on oil's sharp drop

(MENAFN- Khaleej Times)Led by GCC bourses Middle East equity markets fell on Wednesday after oil reversed the strongest rally in 25 years. Dubai's DFM General Index dropped two per cent as Abu Dhabi's ADX General Index fell 0.5 per cent.

Oil futures which have been the main influence on equities in the oil-exporting Gulf during the last few weeks of market turmoil tumbled eight per cent on Tuesday erasing all gains made on the previous day.

But global equities which had dropped on Tuesday because of poor manufacturing data from China were in a better shape. Asian markets edged down at a much slower pace on Wednesday while European bourses and Wall Street were expected to open higher.

In Saudi Arabia the main equity index Tadawul All Share Index fell one per cent to close at 7367.55 having lost 2.8 per cent earlier on Wednesday. On DFM budget airline Air Arabia which could benefit from cheaper fuel rose 1.4 per cent.

Abu Dhabi's bourse edged down 0.5 per cent and energy firm Dana Gas fell 1.9 per cent. Qatar lost 0.3 per cent as heavyweight Industries Qatar whose business is largely in petrochemicals fell 1.7 percent.

Egypt's main index fell 0.7 per cent and bourse data showed pressure mostly came from selling by non-Arab foreign institutions. The Cairo bourse had jumped earlier this week on news that Italy's Eni had discovered a potentially huge natural gas field just off Egypt's coast but the rally was short-lived and the market has resumed moving in line with broader Middle East sentiment.

Some stocks were positive however including El Saeed Contracting and Real Estate Investment which surged 7.6 per cent after announcing a 20 per cent bonus share issue.

Qatar lost 1.1 per cent as Ezdan Holding down 1.7 per cent continued to retreat after local investors and foreign passive funds bid it up in ahead of the stock's weighting increase in MSCI's emerging markets index at the end of last month.

Kuwait's market fell 0.9 per cent and Oman slipped 0.2 per cent.

In Saudi Arabia petrochemicals firm Saudi Basic Industries whose profits are hurt by cheap oil dropped 2.2 per cent and was the main drag. Al Rajhi Bank lost 1.4 per cent and another large lender National Commercial Bank fell 1.9 per cent.

Credit rating agency Fitch this week revised its outlook on both banks' ratings to negative from stable following a similar revision for the sovereign's outlook last month which was due to low oil prices. Real estate developer Jabal Omar fell 0.7 per cent after announcing that it had cancelled a $427 million contract with a construction firm because both sides needed to review it. But Saudi Telecom rose 1.6 per cent after its chief executive told Reuters on Tuesday the firm expected to spend another $1 billion in the second half of 2015 on enhancing its networks to meet surging demand for web-based services.

According to oil market analysts growing US inventories are forcing oil prices down after the biggest three-day gain since 1990.

Saudi Arabia may cut spending on infrastructure projects next year as it undertakes a review of its budget people familiar with the matter said last week. The country needs to sell its oil at about $100 per barrel more than double the current price in order to balance its budget according to Citigroup Inc. analysts said.

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