Arab bourses lost $368bn of market cap

Arab stock markets collapsed by nearly 50 per cent last year to become almost the worst performers in the world although they were not a direct victim of the global financial crisis, official figures showed yesterday.

The stock exchanges of the UAE, Saudi Arabia and other Gulf oil producers were hit hardest despite measures taken by some of the authorities to support the local financial sector, the Abu Dhabi-based Arab Monetary Fund (AMF) said in its quarterly bulletin about the Arab world's 15 official bourses. In terms of capitalisation, the markets plummeted by nearly $368 billion (Dh1.35 trillion) in 2008 to dip to their lowest level in four years at the end of December.

"The AMF's complex index for the Arab stock markets plunged by about 49.4 per cent in 2008 to reach 166.2 points compared to 328.7 points at the end of 2007. Compared to the third quarter, the index tumbled by 34.2 per cent," the report said. "The decline in all Arab bourses, except that in Tunisia, was a result of the global economic crisis. Compared to other markets in both developed and developing nations, the decline in the Arab bourses was larger than those markets as key global bourses receded by between 38 and 43 per cent."

According to the report, the drop in individual Arab markets sharply varied as it was as high as 65 per cent in Dubai and below four per cent in Algeria. Saudi Arabia's Tadawul, the largest and most speculative bourse in the Middle East, dived by 59.2 per cent while Egypt's market plunged by 50.9 per cent, Abu Dhabi by about 44.6 per cent and Kuwait by 40.3 per cent. The report showed market capitalisation slumped by 54.3 per cent in Dubai, nearly 52.2 per cent in Saudi Arabia, 48.1 per cent in Kuwait, about 43.2 per cent in Abu Dhabi and 38.1 per cent in Egypt.

"As for the combined Arab market capitalisation, it dipped by 42.5 per cent to about $769bn at the end of 2008 from $1,137bn at the end of 2007. Compared to the third quarter, it fell by about 32.4 per cent."

"Regarding turnover, the value of shares traded on the Arab bourses also dropped by about 9.9 per cent to $997.8bn last year. The number of listed companies also declined to 1,542 from 1,550," the report said.

The figures showed turnover in the UAE, Saudi Arabia and Kuwait accounted for nearly 80 per cent of the total value of shares traded on the Arab bourses in 2008. The loss last year pushed the Arab markets to their lowest level since December 2004, when their capitalisation stood at around $653bn.

Experts described 2008 as the worst and most controversial year for Arab stock markets in general as they suffered the largest annual loss since they began share dealing. They cited several factors for the decline, including the global financial crisis, foreign sell-offs, fear by small investors and other reasons. "It was one of the most controversial years for regional bourses because the decline has nothing to do with market fundamentals," said Jamal Ajjaj of the Sharjah-based Sharhan Securities.

"If you look at market fundamentals, you find the region's economy was strong, oil prices were high, most of the companies performed well and the bourses are not directly linked to global markets," he added.

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