Shares in Gulf-based food companies fell yesterday, despite analysts' assurances that the sector is among the most resilient to the economic downturn.
In Abu Dhabi, stocks in food and farming companies were down by 0.45 per cent, the only sector to decline during trading in the UAE capital.
Agthia Group, which manufacturers and distributes food, closed down 1 per cent at Dh1.92, while the Abu Dhabi Securities Exchange index edged up 0.37 per cent. Food companies were also hit on the Kuwait Stock Exchange, with shares in the sector declining 0.95 per cent during yesterday's trading.
It was the worst-performing sector in Kuwait, where the benchmark index closed down just 0.2 per cent.
Farouk Miah, an equity analyst at NCB Capital in Riyadh, said the prospect of a declining dollar - to which many Gulf currencies are pegged - was a possible reason behind the drop in the food stocks.
"If the US situation gets more complicated and the dollar weakens … imports get more expensive," he said. However, Mr Miah said there was "no specific" reason behind the declines in Abu Dhabi and Kuwait. "Maybe there are some one-off issues," he said.
In Saudi Arabia, shares in the agriculture and food sector were down just 0.4 per cent - outperforming the market as a whole, where the benchmark Tadawul All-Share index was 0.73 per cent lower. This is more representative of the outlook for the food sector, said Mr Miah.
"Most of the food and dairy companies are outperforming the market," he said.
Despite the declines in Abu Dhabi and Kuwait, food stocks are believed to be among the least vulnerable to the economic gloom that has descended since the historic downgrading of America's top-tier credit rating.
As the prospect of a double-dip economic recession increases, Mr Miah said the food sector, despite yesterday's declines, remained one of the most resilient.
"[Food companies] are probably the safest names in the current economic set-up," he said.