A Gulf-wide sell-off sent markets spiralling downwards yesterday with Saudi Arabia's stock exchange falling by the biggest margin in 18 months as the declining oil price and a confluence of global events hit investor confidence. The Saudi Tadawul All-Share Index lost 6.8 per cent, shaving a combined 33 billion riyals (Dh32.31bn) off the capitalisation of the listed companies. Shares in Dubai posted the second-biggest losses among the regional markets. The Dubai Financial Market (DFM) General Index retreated 4.6 per cent while NASDAQ Dubai lost 5.9 per cent. In Abu Dhabi, the main measure declined 3.1 per cent.
Saudi Basic Industries Corporation, the world's largest petrochemical manufacturer, dropped 10 per cent to 76.75 riyals. None of the 14 petrochemical stocks listed on the Saudi exchange advanced, with Saudi Sipchem, Saudi Kayan and Petro Rabigh all dropping more than 9 per cent. "The capitulation we have seen today across the region is pure fear and human psychology," said Yazan Abdeen, a fund manager at ING Investments Management in Dubai.
Crude prices have slumped about 20 per cent this month, falling as low as US$67.64 a barrel at one point yesterday, on concern that the European debt crisis will curb demand. The drop in petrochemical stocks was clearly tied to the drop in oil prices, Mr Abdeen said, but "there are stories of some stocks taking a beating, which have got nothing to do either with oil or the European crisis". Asian markets tumbled before Gulf bourses were open, which established the negative tone for the day and then news about further troubles with Spanish banks seemed to stoke the fears of traders.
"Pretty much nothing has changed domestically but there is continuous weakness on the international front and the oil future. We are advising our clients caution," said Ali Khan, the managing director and head of equities at Dubai-based Arqaam Capital. In Dubai, among the shares hardest hit was the UAE's largest public company, Emaar Properties, which fell 7.8 per cent to Dh3.30. Arabtec Holding fell 7.1 per cent to Dh2.09. A report by Deutsche Bank pointed to uncertainties over Arabtec's Okhta Centre tower project in St Petersburg but analysts said that appeared to play a small role in the sell-off.
"Arabtec is trading in line with the market. The whole market is weak because of global concerns playing centre stage," Mr Khan said. Emirates NBD, the largest lender in the country by assets, also dropped 3.4 per cent. On the Abu Dhabi Securities Exchange (ADX) General Index, banking and property stocks led the losses with Aldar Properties declining 7.8 per cent to Dh3.19 and Sorouh Real Estate ending 5.1 per cent lower at Dh2.07.
National Bank of Abu Dhabi retreated 5.3 per cent to Dh10.80, while Abu Dhabi Commercial Bank ended 5.6 per cent lower at Dh1.68. Yesterday's declines were notable not only for their size but also because they were accompanied by higher volumes. Just under 100 million shares were traded on the ADX and 281.4 million shares changed hands on the DFM as retail investors took strong selling positions.
"Volumes are a critical part of the story as lower volumes have made it difficult for traders to get into and out of trade positions. It takes three to four days to execute a trade, and several months to get in and out of trading positions," said Saud Masud, an analyst at the Swiss bank UBS in Dubai. He said it appeared some retail investors had decided to get out of equities for the time being and ride out the turmoil in bonds or even cash.
This year, the Dubai bourse is the largest loser among GCC markets, down 12.9 per cent, while the Saudi exchange is 5.9 per cent lower. Abu Dhabi is off 3.4 per cent. In Qatar yesterday, the main index retreated 4.2 per cent with the bellwether Industries Qatar shedding 5 per cent to 94.80 Qatari riyals. Stocks in Kuwait dropped 2.7 per cent with the telecommunications giant Zain retreating 4.4 per cent to 1.3 Kuwaiti dinar. The Muscat measure ended 3.2 per cent down, followed by Bahrain 1.9 per cent lower.
* additional reporting by Hadeel al Sayegh firstname.lastname@example.org