Regional shares hit by global sell-off, Saudi-Iran tensions

Most Middle East stock markets tumbled on Monday in a global sell-off triggered by China, while growing tensions between Saudi Arabia and Iran added to the gloom.

Chinese stocks slumped by 7 per cent after weak manufacturing data, causing emerging markets in general to suffer their biggest fall in four months.

"The broad market sell-off is part of the general weakness in global equity markets," said Muhammad Shabbir, head of equity funds at Dubai-based Rasmala Investment Bank.

The lack of a catalyst that would support a market rally in the Gulf leaves the region vulnerable to volatile trade, he added. In past years, the region outperformed emerging markets because of its strong budget and current account surpluses, but most of those surpluses have now been erased by low oil prices.

"While rising geopolitical tension makes headlines and weighs on sentiment, weakness in oil and worries about Chinese demand remain the primary drivers of GCC (Gulf Cooperation Council) stock markets," said Akber Khan, director of asset management at Doha's Al Rayan Investment.

Saudi Arabia cut diplomatic ties with Iran on Sunday in response to the storming of its embassy in Tehran.

Saudi riyal fell to near a 16-year low against the U.S. dollar in the forward foreign exchange market on Monday. Meanwhile, the cost of insuring Saudi sovereign debt against default rose to multi-year highs.

Riyadh's equities benchmark faced a heavy sell-off in the last hour of trade as investors dumped stocks across the board. The index sank 2.4 per cent.

Savola, one of the few Saudi companies with a presence in Iran, fell 3.2 per cent. The food conglomerate has factories in Tehran; Iran provided 11 per cent of its revenue in the third quarter of 2015 and the company's revenues from Iran totalled 2 billion riyals ($534 million) in the first nine months of 2015, its financial statements showed.

Islamic lender Alinma retreated 3.7 per cent after rising in early trade. Health insurer Bupa Arabia, usually a favourite of foreign investors, plunged 9.6 per cent.

Petrochemical shares showed some early strength after being hit hard by higher natural gas feedstock prices in last week's 2016 state budget. But they succumbed in late trade, with Saudi Basic Industries losing 1.6 per cent.

Dubai, Egypt

The Dubai stock index dropped 1.6 per cent on Monday with all but two shares ending lower. Blue chip Emaar Properties  fell 1.8 per cent in its fourth session of declines, while Dubai Islamic Bank lost 1.5 per cent and Emirates NBD, a stock that rarely trades, sank 1.3 per cent.

Trading volumes were thin, partly because institutional and foreign investors were still largely absent from regional markets after New Year holidays, leaving local retail investors to dominate activity even more than usual.

"Retail day traders are impulsive and are reacting to the slump in Chinese stocks," said Tamer Kamal, head of asset management at Abu Dhabi's Union National Bank.

Abu Dhabi's benchmark retreated 1.3 per cent; Dana Gas, whose affiliate Crescent Petroleum has been in dispute with Iran over natural gas supply, dropped 5.8 per cent and Aldar Properties lost 3.0 per cent.

In Qatar, the index tumbled 2.6 per cent in modest volumes. Two property developers, Ezdan Holding and Barwa Real Estate, led declines, slumping 4.1 and 3.6 per cent respectively.

Cairo's main index declined 1.5 per cent, erasing all of Sunday's gains in a broad sell-off. Blue-chip lender Commercial International Bank fell 2.5 per cent after surging 7.4 per cent in the previous session. Orasom Telecom , a favourite of non-Egyptian Arab investors, sank 5.6 per cent.

MONDAY'S HIGHLIGHTS

SAUDI ARABIA: The index tumbled 2.4 per cent to 6,788 points.

DUBAI: The index retreated 1.6 per cent to 3,084 points.

ABU DHABI: The index declined 1.3 per cent to 4,216 points.

QATAR: The index sank 2.6 per cent to 10,042 points.

EGYPT: The index declined 1.5 per cent to 6,982 points.

KUWAIT: The index fell 0.8 per cent to 5,568 points.

OMAN: The index advanced 0.2 per cent to 5,421 points.

BAHRAIN: The index slipped 0.2 per cent to 1,213 points.  

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