Mideast Stocks Sink as Oil at 2009-Low Sparks Growth Concern
2015-08-23 13:48:31.353 GMT
By Sarmad Khan, Ahmed A. Namatalla and Yaacov Benmeleh
(Bloomberg) -- Dubai led a retreat in Middle Eastern stocks
that drove Saudi Arabia’s index into a bear market, extending
last week’s global selloff, as crude’s decline to a six-year low
reverberated through a region dependent on oil and gas exports.
The DFM General Index lost as much as 7.5 percent, the most
this year. Saudi Arabia’s Tadawul All Share Index tumbled 6.9
percent, taking its decline since 2015’s peak in April to 24
percent. Qatar’s QE Index fell 5.3 percent, while Israel’s TA-25
Index lost 4.1 percent. Egypt’s EGX 30 Index slid the most since
November 2012. Gauges in Abu Dhabi and Oman declined more than
10 percent since a recent peak, the threshold for a market
correction.
The slide in Brent crude, the benchmark grade for more than
half the world’s oil, to the lowest close since March 2009 is
piling pressure on Gulf states at a time when investors are
pulling out of higher-risk assets following China’s devaluation
of the yuan and growing expectations that the U.S. will increase
interest rates by year-end. The six-nation Gulf Cooperation
Council is home to about 30 percent of the world’s proven oil
reserves.
Given Saudi Arabia’s stature as “a bellwether for the
region, we’ll probably see more declines,” following Tadawul’s
slump into a bear market, said Tariq Qaqish, who oversees $150
million as the head of asset management at Al Mal Capital PSC
in Dubai. “Saudi Arabia is going to have to cut its spending,
especially if oil remains at these levels. Otherwise it’s going
to impact growth of the Middle East’s biggest economy.”
The MSCI Emerging Market Index closed at the lowest level
in six years on Friday as Brent fell to $45.46 per barrel and
West Texas Intermediate traded as low as $39.86 per barrel
before closing at $40.45 on the New York Mercantile Exchange.
WTI may decline to $32 on a persisting global surplus, Citigroup
Inc. said Wednesday.
Bear Markets
The Bloomberg GCC 200 Index, which tracks 200 stocks in the
GCC, sank the most since October 2008. Abu Dhabi’s ADX General
Index declined 5 percent, taking losses since a peak in July to
13 percent. Muscat’s MSM30 Index lost 2.9 percent, down 12
percent from a high in February.
The bear market in Saudi Arabian equities marks the second
in less than a year. Fitch Ratings on Saturday cut the outlook
on the nation’s AA debt rating to negative from stable,
indicating its next decision may be to lower its assessment.
“The Saudi market is taking a cue from global markets and
oil prices, which fell further on Friday,” Muhammad Faisal
Potrik, the head of research at Riyad Capital, said from the
kingdom’s capital. “Weak economic data from China and the U.S.,
and Fitch revising Saudi Arabia’s outlook to negative is not
helping either. The combination of those matrices will reflect
negatively on Saudi stocks initially this week, but we’ll have
to see how oil prices perform toward the end of it.”
All but six stocks in Saudi Arabia’s 171-member index fell,
with Saudi Basic Industries Corp., one of the world’s largest
chemicals manufacturers, leading the slump with a 9.5 percent
loss.
Regional Selloff
“There’s indiscriminate selling across the board as
regional markets follow the selloff in oil,” Ramez Merhi, a
Dubai-based director at Al Masah Capital Ltd., which manages
$500 million, said by e-mail. “Regional economies could slow
significantly if these prices are sustained.”
Dubai stocks edged closer to a bear market after the index
sank 7 percent to close at 3,451.48, bringing its loss since
2015’s peak to 18 percent. Traders exchanged about 340 million
shares on the index, 14 percent more than the 12-month average.
Dubai-based developer Emaar Properties PJSC led the drop with an
8.3 percent slide to the lowest level since December.
The relative-strength index of Dubai’s benchmark gauge fell
to 13, the lowest since December. The indicator posted a reading
of less than 30 for the rest of GCC markets, Egypt and Israel,
indicating to some analysts that they’re oversold and may be
poised to reverse course.
Israel Drops
The MSCI Emerging Markets Index last week slid below a
trading band that support prices for the first time in four
years, ending a pattern that technical analysts call a
“channel” in favor of bears. The equities gauge, which
fulfilled the description of a bear market last week by dropping
20 percent from a peak, is heading for the worst August since
1998.
Concern over a global slowdown is gathering pace after data
out of China showed the nation’s manufacturing was at the lowest
level in more than six years. The global equity selloff that
sent gauges in Taiwan, Brazil and Indonesia into bear markets is
starting to show up in Israel, which was relatively unscathed
last week with a 1 percent decline.
Israel’s TA-25 Index slumped the most since September 2011,
led by Bank Leumi Le-Israel’s 5.1 percent drop.
“The panic has reached Israel,” Tel Aviv-based Adi
Babani, a trader at Bank of Jerusalem Ltd., said by e-mail.
“It’s not as bad as other markets around the world, but
investors are certainly concerned about global economic growth
because Israel’s economy so heavily depends on international
trade. Also, the Bank of Israel’s interest rate decision is
tomorrow, which is holding back the declines as some expect a
cut.”
Two of the seventeen economist surveyed by Bloomberg
forecast the country’s central bank will reduce the base lending
rate on Monday from a record low of 0.1 percent. The remainder
predict no change.
Israeli bonds rose for a third day, with the yield on the
country’s 1.75 percent securities due August 2025 falling three
basis points to 2.12 percent.
Egypt Slumps
Egypt’s benchmark EGX30 Index retreated 5.4 percent, led by
Commercial International Bank Egypt SAE’s 5.2 percent drop. The
company accounts for about 35 percent of the gauge.
“The weakness in global markets is hitting us, much like
the Gulf,” said Ashraf Akhnoukh, the manager for Middle East
and North Africa at Cairo-based CI Capital. “But you have to
add to that Egypt’s own set of problems, including repatriation
of foreign funds, no parliament and a declining likelihood of
getting aid from the Gulf as oil drops.”
The North African country’s central bank has limited access
to foreign currency and placed restrictions on outward transfers
since the onset of the 2011 Arab Spring in order to cope with a
shortage of dollars resulting from the slump in tourism and
foreign investment.
The Egyptian pound is one of the world’s most vulnerable
currencies to a possible devaluation following Kazakhstan’s
decision Thursday to weaken its tenge, according to John-Paul
Smith, the ex-Deutsche Bank AG strategist who predicted Russia’s
1998 crisis and this year’s China rout.
(An earlier version of this story corrected the scale of Brent’s
move in the third paragraph.)
For Related News and Information:
Top Stories:TOP<GO>
Oil Falls Below $40 for First Time Since 2009 as Glut Worsens
--With assistance from Sharon Wrobel in Tel Aviv and Deema
Almashabi in Riyadh.
To contact the reporters on this story:
Sarmad Khan in Dubai at +971-4-3641045 or
skhan170@bloomberg.net;
Ahmed A. Namatalla in Cairo at +20-2-2739-6414 or
anamatalla@bloomberg.net;
Yaacov Benmeleh in Tel Aviv at +972-3-542-7137 or
ybenmeleh@bloomberg.net
To contact the editors responsible for this story:
Samuel Potter at +971-4-3641050 or
spotter33@bloomberg.net
Dana El Baltaji
2015-08-23 13:48:31.353 GMT
By Sarmad Khan, Ahmed A. Namatalla and Yaacov Benmeleh
(Bloomberg) -- Dubai led a retreat in Middle Eastern stocks
that drove Saudi Arabia’s index into a bear market, extending
last week’s global selloff, as crude’s decline to a six-year low
reverberated through a region dependent on oil and gas exports.
The DFM General Index lost as much as 7.5 percent, the most
this year. Saudi Arabia’s Tadawul All Share Index tumbled 6.9
percent, taking its decline since 2015’s peak in April to 24
percent. Qatar’s QE Index fell 5.3 percent, while Israel’s TA-25
Index lost 4.1 percent. Egypt’s EGX 30 Index slid the most since
November 2012. Gauges in Abu Dhabi and Oman declined more than
10 percent since a recent peak, the threshold for a market
correction.
The slide in Brent crude, the benchmark grade for more than
half the world’s oil, to the lowest close since March 2009 is
piling pressure on Gulf states at a time when investors are
pulling out of higher-risk assets following China’s devaluation
of the yuan and growing expectations that the U.S. will increase
interest rates by year-end. The six-nation Gulf Cooperation
Council is home to about 30 percent of the world’s proven oil
reserves.
Given Saudi Arabia’s stature as “a bellwether for the
region, we’ll probably see more declines,” following Tadawul’s
slump into a bear market, said Tariq Qaqish, who oversees $150
million as the head of asset management at Al Mal Capital PSC
in Dubai. “Saudi Arabia is going to have to cut its spending,
especially if oil remains at these levels. Otherwise it’s going
to impact growth of the Middle East’s biggest economy.”
The MSCI Emerging Market Index closed at the lowest level
in six years on Friday as Brent fell to $45.46 per barrel and
West Texas Intermediate traded as low as $39.86 per barrel
before closing at $40.45 on the New York Mercantile Exchange.
WTI may decline to $32 on a persisting global surplus, Citigroup
Inc. said Wednesday.
Bear Markets
The Bloomberg GCC 200 Index, which tracks 200 stocks in the
GCC, sank the most since October 2008. Abu Dhabi’s ADX General
Index declined 5 percent, taking losses since a peak in July to
13 percent. Muscat’s MSM30 Index lost 2.9 percent, down 12
percent from a high in February.
The bear market in Saudi Arabian equities marks the second
in less than a year. Fitch Ratings on Saturday cut the outlook
on the nation’s AA debt rating to negative from stable,
indicating its next decision may be to lower its assessment.
“The Saudi market is taking a cue from global markets and
oil prices, which fell further on Friday,” Muhammad Faisal
Potrik, the head of research at Riyad Capital, said from the
kingdom’s capital. “Weak economic data from China and the U.S.,
and Fitch revising Saudi Arabia’s outlook to negative is not
helping either. The combination of those matrices will reflect
negatively on Saudi stocks initially this week, but we’ll have
to see how oil prices perform toward the end of it.”
All but six stocks in Saudi Arabia’s 171-member index fell,
with Saudi Basic Industries Corp., one of the world’s largest
chemicals manufacturers, leading the slump with a 9.5 percent
loss.
Regional Selloff
“There’s indiscriminate selling across the board as
regional markets follow the selloff in oil,” Ramez Merhi, a
Dubai-based director at Al Masah Capital Ltd., which manages
$500 million, said by e-mail. “Regional economies could slow
significantly if these prices are sustained.”
Dubai stocks edged closer to a bear market after the index
sank 7 percent to close at 3,451.48, bringing its loss since
2015’s peak to 18 percent. Traders exchanged about 340 million
shares on the index, 14 percent more than the 12-month average.
Dubai-based developer Emaar Properties PJSC led the drop with an
8.3 percent slide to the lowest level since December.
The relative-strength index of Dubai’s benchmark gauge fell
to 13, the lowest since December. The indicator posted a reading
of less than 30 for the rest of GCC markets, Egypt and Israel,
indicating to some analysts that they’re oversold and may be
poised to reverse course.
Israel Drops
The MSCI Emerging Markets Index last week slid below a
trading band that support prices for the first time in four
years, ending a pattern that technical analysts call a
“channel” in favor of bears. The equities gauge, which
fulfilled the description of a bear market last week by dropping
20 percent from a peak, is heading for the worst August since
1998.
Concern over a global slowdown is gathering pace after data
out of China showed the nation’s manufacturing was at the lowest
level in more than six years. The global equity selloff that
sent gauges in Taiwan, Brazil and Indonesia into bear markets is
starting to show up in Israel, which was relatively unscathed
last week with a 1 percent decline.
Israel’s TA-25 Index slumped the most since September 2011,
led by Bank Leumi Le-Israel’s 5.1 percent drop.
“The panic has reached Israel,” Tel Aviv-based Adi
Babani, a trader at Bank of Jerusalem Ltd., said by e-mail.
“It’s not as bad as other markets around the world, but
investors are certainly concerned about global economic growth
because Israel’s economy so heavily depends on international
trade. Also, the Bank of Israel’s interest rate decision is
tomorrow, which is holding back the declines as some expect a
cut.”
Two of the seventeen economist surveyed by Bloomberg
forecast the country’s central bank will reduce the base lending
rate on Monday from a record low of 0.1 percent. The remainder
predict no change.
Israeli bonds rose for a third day, with the yield on the
country’s 1.75 percent securities due August 2025 falling three
basis points to 2.12 percent.
Egypt Slumps
Egypt’s benchmark EGX30 Index retreated 5.4 percent, led by
Commercial International Bank Egypt SAE’s 5.2 percent drop. The
company accounts for about 35 percent of the gauge.
“The weakness in global markets is hitting us, much like
the Gulf,” said Ashraf Akhnoukh, the manager for Middle East
and North Africa at Cairo-based CI Capital. “But you have to
add to that Egypt’s own set of problems, including repatriation
of foreign funds, no parliament and a declining likelihood of
getting aid from the Gulf as oil drops.”
The North African country’s central bank has limited access
to foreign currency and placed restrictions on outward transfers
since the onset of the 2011 Arab Spring in order to cope with a
shortage of dollars resulting from the slump in tourism and
foreign investment.
The Egyptian pound is one of the world’s most vulnerable
currencies to a possible devaluation following Kazakhstan’s
decision Thursday to weaken its tenge, according to John-Paul
Smith, the ex-Deutsche Bank AG strategist who predicted Russia’s
1998 crisis and this year’s China rout.
(An earlier version of this story corrected the scale of Brent’s
move in the third paragraph.)
For Related News and Information:
Top Stories:TOP<GO>
Oil Falls Below $40 for First Time Since 2009 as Glut Worsens
--With assistance from Sharon Wrobel in Tel Aviv and Deema
Almashabi in Riyadh.
To contact the reporters on this story:
Sarmad Khan in Dubai at +971-4-3641045 or
skhan170@bloomberg.net;
Ahmed A. Namatalla in Cairo at +20-2-2739-6414 or
anamatalla@bloomberg.net;
Yaacov Benmeleh in Tel Aviv at +972-3-542-7137 or
ybenmeleh@bloomberg.net
To contact the editors responsible for this story:
Samuel Potter at +971-4-3641050 or
spotter33@bloomberg.net
Dana El Baltaji