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11 December 2023

No panic, but Gulf stocks may stay weak as oil dips to $46

Brent crude oil dropped in Asian trade on Tuesday after 5% plunge on Monday . (Reuters)

By Reuters

Tumbling oil prices may keep most Gulf stock markets weak on Tuesday although Saudi Arabian banks could continue to outperform because of strong fourth-quarter earnings.

Brent crude oil has dropped into the $46 area in Asian trade on Tuesday after a 5 per cent plunge on Monday.

Although Gulf bourses have in the last few weeks become somewhat more comfortable with the oil price slide and no longer panic, the uncertainty over where and when oil will bottom continues to weigh heavily on investors.

Petrochemical stocks face a direct threat to their earnings and may again underperform on Tuesday.

Industries Qatar, which has been sinking because of a disappointing 2014 dividend proposal, last closed at 148.10 riyals; it has turned technically very bearish after triggering this week a double top formed by this year's highs. The pattern points down to about 130 riyals in the medium term.

Saudi Arabian Fertilizer Co, a unit of Saudi Basic Industries Corp, late on Monday reported a 3 per cent drop in fourth-quarter net profit to 779 million riyals ($208 million) because of lower ammonia sales and reduced profits from a sister company. Analysts polled by Reuters had on average forecast 893 million riyals.

However, Saudi banks' earnings announcements have remained strong. Banque Saudi Fransi posted a three-fold rise in net profit to 851 million riyals for the quarter, above analysts' average forecast of 780 million riyals.

In Egypt, market sentiment may be boosted by news that the stock exchange will allow trading in exchange-traded funds for the first time on Wednesday.

The reform had been delayed for many months and the immediate impact on trading will not be large; Beltone Financial Holding is launching an ETF with an initial value of just 10 million Egyptian pounds ($1.4 million). But it is an important step towards attracting fresh investment to the bourse and improving liquidity.