Dubai stocks dragged down with Brent oil at lowest since 2004
Regional markets faced further downward pressure as falling oil prices dragged Dubai, Saudi Arabia and Qatar to multiyear lows on Sunday.
Brent crude futures on Friday fell to levels last prevailing in 2004, closing down 4.5 per cent to $37.93 per barrel, after the International Energy Agency warned that oversupply of crude oil may worsen next year, putting further pressure on prices.
The US crude benchmark West Texas Intermediate also declined, ending down 3.1 per cent at $35.62 a barrel, with domestic demand hit by forecasts of warmer temperatures in the United States.
The drop in prices prompted a sell-off of equities worldwide, with the S&P 500 and London’s FTSE 100 falling 1.9 per cent and 2.2 per cent, respectively, despite better-than-forecast economic data from China.
The Qatar Exchange in Doha was the worst-affected market in the region, closing down 3.7 per cent at 9,643.65, its lowest closing level since October 2013.
Shares in Saudi Arabia, the world’s largest exporter of oil, followed close behind, closing down 2.6 per cent at 6,764.60, its lowest close for more than three years.
In the UAE, the Dubai Financial Market General Index ended lower for the sixth consecutive day, losing 2.1 per cent of its value at 2,882.80, its lowest level since November last year.
“There’s not a lot to look forward to until the crude oil market stabilises,” said Sanyalak Manibandhu, a research manager at NBAD Securities in Abu Dhabi. “It was clear from the recent Opec meeting that there’s no stabilisation coming in the short term, so people are selling out all their risk assets, which include equities in the region.”
Seven of the 10 largest stocks on the Dubai index closed yesterday at their lowest level for the year.
Emirates NBD and Dubai Islamic Bank were among the worst affected, closing down 4.1 per cent and 3 per cent, respectively.
Dubai’s index has lost nearly a quarter of its value since the start of the year, shedding 10 per cent since the start of the month.
Investors have little incentive to return to the market until next month’s dividend season, said Mr Manibandhu.
“Before that we need to see how markets react to the expected increase in US interest rates later this week.”
The US Federal Reserve is widely tipped to raise interest rates for the first time since 2006 at its monthly two-day meeting scheduled to take place on Wednesday.
While the interest rate rise is not forecast to have a big impact on the UAE dirham, which is pegged to the US dollar, analysts have suggested that the country’s economy might be affected by a wider sell-off of emerging-market securities.
The Abu Dhabi Securities Exchange General Index shed 2.4 per cent at 3,987.69, its lowest level since last December, with all but one share ending in the red.
FGB fell 3 per cent to a new low for the year of Dh11.15, while Etisalat and Aldar Properties dropped 2.4 per cent and 2.6 per cent respectively.
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Updated: December 13, 2015 04:00 AM