(MENAFN - Arab Times) Most stock markets in the energy-rich Gulf slumped on the week's opener Sunday as intervention by governments failed to restore sentiment among investors worried by global financial turmoil. Riyadh cut interest rates for the third time in six weeks, slashing the repo rate by one percentage point a day after the Saudi bourse - the region's largest - sank more than nine percent.
Kuwait and Oman last week set up special funds to buy stocks on the sagging markets while the United Arab Emirates on Saturday announced the start of a process to merge two leading real estate finance firms. All seven regional markets dropped, with Dubai, Doha and Saudi shares leading the way. "I think there is much negative sentiment in the Gulf bourses because of the flurry of (bad) news from the international markets," head of economic research at Kuwait's Global Investment House, Faisal Hasan, told AFP.
"There was also a contagion effect from the slump of the Saudi market," on Saturday. The Saudi bourse is open from Saturday to Wednesday while other Gulf stock exchanges operate from Sunday to Thursday. Shares tumbled across the oil-exporting Gulf as investors took crude's drop below 50 a barrel as a signal the region would be forced to brake expansion, likely weighing on companies' future profits.
Saudi Arabia's bourse, which suffered a more than 9-percent drop on Saturday, fell another 3.77 percent as the central bank of the world's top oil exporter slashed its benchmark interest rate by 100 basis points to boost liquidity. The slump in Saudi stocks shook markets across the Gulf; Dubai's index retreated almost 5 percent to a fresh four-year low and Qatar's measure ended four days of gains, shedding more than 4 percent.
"Investors are right on the edge," said Amro Motasim, chief trader at Qatar's Ahli Bank. "When they see something negative anywhere, they start selling." Oil prices fell below 50 a barrel last week - around the level that the Gulf's oil producers base their budgets. After an economic boom spurred by six years of high oil prices, the region's governments will likely slow down rapid expansion plans designed to diversify their economies away from relying on oil export revenues. Investors expect company profits could take a hit as demand slows in a possible global recession.
"There is really, really negative sentiment and fears of oil dropping further," said Haissam Arabi, chief executive and fund manager for Gulfmena Alternative Investments, a regional specialist hedge fund company under formation. "The governments' ability to continue its expansionary policy is going to be hindered by lower oil revenues." Most blue-chip stocks in the Gulf are trading at two to three times expected 2008 earnings, but markets are dominated by retail investors whose focus is to book quick profits, not trade on fundamentals, analysts said.
- The index lost 4.73 percent to 1,917 points, its lowest close since Nov. 18, 2004.
- Emaar Properties dropped 7.77 percent to 2.73 UAE dirhams, its lowest close since Aug. 1, 2004.
- Trading in stock of Amlak and Tamweel was suspended as the government unveiled plans to bring the two mortgage financers under a government-owned bank.
"The trend is down, down, down," said Amr Diab, head of sales at EFG-Hermes. "The markets in the region are dominated by retail investors and retail investors are not long-term investors - they trade the market and cut losses quickly."
- The index extended a selloff into a fourth trading day, falling 3.77 percent to 4,264 points. The benchmark is down more than 60 percent this year.
- Saudi Basic Industries Corp fell 3.59 percent and Samba Financial Group 6.99 percent.
- Investors expect earnings of companies like SABIC will be slashed by slower demand during a possible global recession, Arabi said.
- Kingdom Holding Co, owned by Citigroup's largest shareholder Prince Alwaleed bin Talal, tumbled 7.14 percent as Citigroup begins talks with the US government amid doubts about the lender's ability to survive.
- The measure, down more than 50 percent since June, fell 4.02 percent to 5,575 points, after closing higher for four consecutive days.
- Industries Qatar dropped 6.25 percent.
"The Saudi drop created more negative sentiment. The market was already in a downtrend," Motasim said.
"There are big rumours oil is going to reach 30. The main driver of the economy here is the government and most government revenues come from oil. The fear is future expansion plans will be shelved or put on hold," Motasim says.
- The index closed lower for the first time in five trading days, down 2.59 percent to 6,060 points.
- Oman set up a 150 million rial market-maker fund with the private sector last week to stabilise the bourse, down about 50 percent since hitting a record high on June 12.
- Bank Muscat dropped 2.77 percent and Oman International Bank 7.89 percent.
- The index fell 1.26 percent to 2,797 points.
- First Gulf Bank shed 4.2 percent.
- The index lost 0.85 percent to 2,037 points.
- Bank of Bahrain and Kuwait tumbled 10 percent.
Main Egyptian stock indexes snapped an eight-session losing streak to end slightly higher on Sunday, with investors chasing bargain prices on companies including Orascom Telecom. The benchmark CASE 30 index rose 0.73 percent to 3,906.25 points.
The rival Hermes index added 0.92 percent to 369.96 points and the broader CIBC lost 2.79 percent to 268 points. Shares in the biggest Arab mobile phone operator by subscribers, down nearly 80 percent this year to Thursday's close, last traded 2.95 percent up at 22.30 Egyptian pounds (4.02). Mohamed Radwan, a trader at Pharos Securities, said a rally in the US stock market on Friday on reports that President-elect Barack Obama had picked Timothy Geithner as Treasury Secretary helped push shares higher.
"Local investors see the high correlation between Egypt and the US and they anticipate a better week," he said. "People are looking for stocks that were really damaged last week." Shares in MobiNil rose 2.28 percent to 119 pounds, while Ezz Dekheila Steel gained 1.75 percent to last trade at 735.50 pounds.