The effects of the European economic turmoil continue to wash up on the Gulf as regional bourses were down across the board yesterday. The causes for the decline in equities were varied: falling oil prices, concerns about global growth and disappointing local earnings. The bearish trend, which continues from last week, seems to contradict the assertion by some analysts that the euro zone's debt troubles would not have a meaningful effect on regional economies.
At the same time, some argued that Europe's troubles could make the UAE appear an attractive place for investment by comparison. "Our markets can definitely benefit from what's happening in Europe if the Dubai World problems are addressed properly," said Mohammed Ali Yasin, the chief executive of Shuaa Securities, told Reuters. "If (foreign investors) believe the euro will go down, they will invest in our markets where the currency is pegged to the dollar and benefit from the currency appreciation."
The ripple effects from Europe were arguably felt most directly in Saudi Arabia, where an index of the kingdom's petrochemical companies dropped 5 per cent in the past two days over fears that global oil demand would slacken. Oil tumbled yesterday to a three-month low of US$71.61 a barrel. Around the GCC there were other contributors to the overall negative sentiment. Agility, the Kuwaiti logistics company, lost 3.5 per cent as it said profit had fallen 52 per cent for the first quarter, compared with the same period last year.
Emaar Properties, the bellwether of the Dubai Financial Market (DFM) and the developer of the world's tallest skyscraper, also slid 2.1 per cent as investors worried about whether global debt issues would hinder a broader economic recovery in the UAE. The DFM General Index retreated 1.5 per cent to 1,692.4, the lowest since last Tuesday. The bright spot in the regional markets, Abu Dhabi's Aabar Investments, climbed 1.5 per cent.