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(MENAFN - Arab News) Investors were in a selling mood on most Gulf Arab markets on Tuesday, as the previous day's gains were mostly cancelled out.
Analysts predict the volatility in regional bourses to continue, as the markets correct after a rally which preceded third quarter reporting season.
Only one sector managed to close with a gain on Saudi bourse, which was the insurance sector, closing up 1.36 percent. All other sectors were negative, closing with losses which ranged between 0.52 percent in the agriculture and food industries sector, and 2.23 percent in the petrochemical industries sector. Overall market breadth was negative, with 107 decliners beating out 20 advancers, giving an AD ratio of 0.19.
Dubai's index DFMGI slumped 5 percent for the second time in the week, after surging by the same percentage on Monday, its largest one-day gain since February.
"Generally speaking the outlook for shares is still in doubt," says Chamel Sahmy, regional senior sales trader at Beltone Financial.
"There are still a number of fronts that could deteriorate. The correlation with international markets is affecting our performance and volatility will persist."
Real estate and related stocks were the main drag on benchmarks in Dubai and in Abu Dhabi. Bellwether Emaar Properties slumped 7.3 percent and Arabtec declined 6.2 percent.
In Abu Dhabi, Aldar Properties fell 4.9 percent.
"The volumes were not bad. But the market is correcting, and it will take some time," said Moussa Haddad, head of Middle East equities desk at National Bank of Abu Dhabi.
"We are likely to see a very volatile month. However, long term investors should be holding positions, and will be waiting for end of year results."
Index heavyweights and financials were the main drag on the Saudi benchmark TASI. Saudi Basic Industries Corp. (SABIC) declined 3.9 percent, and Al-Rahji bank, the country's largest listed lender, fell 2 percent.
"The Saudi market was unable to maintain the positive streak, failing to close above the 5 day moving average. Nonetheless, liquidity was back up over the SR5 billion mark today, despite losses, which is a negative indication of the market's general movement. Once again, our goal will be to close above the 5 day moving average on a consecutive basis," said Financial Transaction House in its daily market report.
"Some people are still wondering about the profitability of, for example, financial institutions, whether they are sustainable," said Jithesh Gopi, head of research at Sico in Bahrain, adding that the broader global sentiment is also affecting regional investors.
Although the US markets closed higher on Monday, one factor for some panic-selling seen on Gulf bourses, especially toward the end of the session, was likely to be negative banks data out of Europe.
News that US stock index futures fell in early Tuesday trading as a result, may also weigh on Gulf benchmarks on Wednesday.
Benchmarks in Qatar (QSI), Kuwait (KWSE) and Oman (MSI) all retreated on Tuesday, but Bahrain's index (BAX) bucked the regional trend and rose 0.2 percent.
"Long-term investors are staying on the sidelines, they are very cautious about taking new positions in the markets," Beltone's Sahmy said.
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