Major Middle Eastern stock markets fell on Sunday after Standard & Poor's cut its rating of Saudi Arabia's sovereign debt and maintained a negative outlook on it, citing damage to state finances from low oil prices.
The downgrade will have almost no direct financial impact on Saudi Arabia because the government and Saudi companies have minimal foreign debt. The world's other two major rating agencies, Moody's and Fitch, have higher ratings for the kingdom than S&P.
But S&P's action fed into investor concern about the long-term direction of Saudi finances in an era of cheap oil, and about the fiscal tightening that Riyadh will probably have to conduct next year to get its budget deficit under control.
The prospect of a slowdown in Saudi Arabia has been worrying investors in Middle Eastern markets as far afield as Egypt, because of the flows of Saudi money around the region.
The Saudi stock index dropped 1.1 percent to 7,046 points, nearing technical support at its August low of 6,921 points.
Alinma Bank slid 3.3 percent and Emaar Economic City, developer of a major industrial zone, lost 2.6 percent. However, petrochemical blue chip Saudi Basic Industries rose 0.6 percent.
Investment firm Kingdom Holding climbed 2.0 percent after saying it would sell its 29.9 percent stake in media firm Saudi Research and Marketing Group for 837.2 million riyals ($223 million) in a private off-market transaction at 35 riyals per share.
SRMG shares last traded in the market on Wednesday at 18.80 riyals, having soared from 13.0 riyals in heavy trade over the previous six days.
The Dubai stock index sank 2.1 percent to 3,431 points, breaking technical support around 3,500 points, which had supported it since early September. The market's next chart support is the August low at 3,241 points.
All of the market's 10 most heavily traded stocks dropped, with builder Arabtec, which has projects in Saudi Arabia, losing 4.3 percent.
Abu Dhabi's index fell 0.5 percent but National Bank of Abu Dhabi, the United Arab Emirates' biggest listed lender, climbed 1.7 percent after a drop last week due to disappointing third-quarter earnings. Qatar, seen as a defensive market because of high dividend yields and the Qatari government's comfortable financial position, edged down just 0.2 percent.
Stocks were generally slightly stronger in Kuwait, Oman and Bahrain, which are thinly traded and therefore less exposed to the market trend in Saudi Arabia. National Bank of Oman jumped 7.3 percent in low turnover.
Egypt's stock index slipped 1.3 percent. Investment firm Qalaa Holding dropped 5.9 percent after one of its subsidiaries said it planned to sell its stakes in ASEC Minya and ASEC Ready Mix to Misr Cement (Qena) for 1 billion Egyptian pounds ($125 million).
GB Auto fell a further 7.0 percent. It had tumbled 4.9 percent on Thursday after saying production at some of its factories had been halted for 20 days during September and October by delays in receiving supplies.
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