DUBAI: Saudi Arabia’s shares slumped yesterday, dragging the market down to a 10-month low as political turmoil in Egypt sparked by the President’s new powers spooked regional investors, while other Gulf markets closed mixed.
Egypt President Mohammed Mursi’s decree issued on Thursday that defends his decisions from judicial review, set off street violence and unravelled efforts to restore stability after last year’s revolution. Cairo’s index plunged 9.6 percent. Investors are concerned Egypt’s political unrest could have widespread implications for the Middle East.
The stock market fall - halted only by automatic curbs - was the worst since the uprising that toppled Hosni Mubarak in February, 2011. Investors had grown more confident in recent months that a legitimately elected government would help Egypt put its economic and political problems behind it. The stock market’s main index had risen 35 percent since Mursi’s victory. It closed on Sunday at its lowest level since July 31.
Political turmoil also raised the cost of government borrowing at a treasury bill auction yesterday. “Investors know that Mursi’s decisions will not be accepted and that there will be clashes on the street,” said Osama Mourad of Arab Financial Brokerage. Just last week, investor confidence was helped by a preliminary agreement with the IMF over a $4.8bn loan needed to shore up state finances.
“The market was already under pressure from the violence in Gaza and now it’s Egypt’s protest,” said a Riyadh-based trader. Saudi’s heavyweight sectors - petrochemicals and banking - were the main drag. Saudi Basic Industries Corp (Sabic), the world’s largest chemicals producer fell 2.3 percent. Al Rajhi Bank dropped 1.2 percent and Samba Financial Group shed 2.2 percent.
The kingdom’s index dropped 2.1 percent to its lowest close since January 25 and marked its biggest one-day loss since early June. “The index broke the key support of 6,550 sharply to the down side,” said Mohabeldeen Agena, head of technical analysis at Cairo’s Beltone Financial. “We are expecting the bears to continue pushing it downward towards 6,300 levels.
In Dubai, property stocks helped lift the index, which gained 0.3 percent, after plans announced for a new mega project in the emirate. Emaar Properties climbed 2.2 percent, Drake & Scull added 0.6 percent and builder Arabtec rose 1.3 percent. The emirate’s ruler on Saturday unveiled a master development that appeared to include re-starting projects that were halted following a property price crash.
“Real estate stocks are back on the move with Dubai’s plans,” said a Dubai-based analyst. “This not only gives the market a signal that strong demand is back on track but also a positive push to market sentiment and appetite for these highly liquid stocks.”
Abu Dhabi’s Dana Gas climbed 5.1 percent, the most active stock on the index. The natural gas producer, in talks to restructure a $920m Islamic bond, is offering bondholders cash and an average 8 percent coupon on two new sukuks to replace the existing one, two sources said.
In Kuwait, the index slipped 0.2 percent from Thursday’s five-week high as retail investors booked recent gains. “It was a seller’s market with retail investors making a quick buck - people were buying again into small and big-cap stocks which is a good sign,” said Fouad Darwish, head of brokerage at Global Investment House.
The market has gained around 4 percent since slumping to an eight-year low hit on November 4, in part due to state-linked funds buying bluechip stocks to stabilise the market. Dawish said this buying was muted as the market held its ground. Kuwait’s Emir H H Sheikh Sabah Al Ahmad Al Sabah, said earlier this month that he would deal with political problems and revive the economy. Reuters
