Saudi Arabian equities declined on Sunday, weighed down by banking shares, in line with major markets on Friday after the US Federal Reserve cut interest rates, which was followed by rate cuts by most Gulf central banks.
"Global factors such as Fed's rate cut and trade concerns post Trump's tweets on possible 10% tariff on additional goods are likely the reasons [behind the weakness]," said Pritish K. Devassy, head of equity research at Al Rajhi Capital.
"The Fed's cut affects Saudi banks as net interest margins decline while more tariffs imply global demand weakness which is negative for petrochemical prices. Given these two sectors constitute a large chunk of the Saudi Index, the indices have declined," Devassy said.
The Saudi market was also taking cues from a fall in US markets on Friday, "as well as a net decline in international oil prices over the last two trading sessions," said Muhammad Faisal Potrik, head of research at Riyad Capital.
Saudi banking stocks were also hit by news that Saudi Binladin Group (SBG) was seeking a financial adviser for restructuring of its debt which could range between $20-$30 billion.
Goldman Sachs said in a report to clients it was "getting questions on the exposure of Saudi banks to Saudi Binladin Group".
"Given SBG's dominant position in the Saudi contracting space for many years, the exposure could be material in our view," the report dated August 2 said.
The Tadawul All-Share index closed down 1.3% on Sunday.
National Commercial Bank, the country's largest lender, was down 2.9%. Al Rajhi Bank, the country's biggest Islamic lender, was down 1%.
Riyad Bank, Samba Financial Group, and Saudi British Bank were down 2.5%, 3.7% and 3.2% respectively.
The US Federal Reserve cut interest rates on Wednesday night by 25 basis points but, significantly, signalled the move may not mark the beginning of a long easing cycle.
Central banks in Saudi Arabia, the United Arab Emirates and Qatar followed the move, cutting their rates by the same margin. Their currencies are pegged to the US dollar and they follow the Fed on interest rate moves.
In Abu Dhabi, the index declined 1%, dragged lower by the market heavyweight lender First Abu Dhabi Bank, which was down 1.4%.
Qatar's index fell 0.4% with the Gulf's biggest lender Qatar National Bank shedding 0.8% and Qatar Navigation losing 3.8%.
Dubai's index was also down 1.5% with the emirate's biggest developer Emaar Properties down 4%. Emaar Development, a unit of Emaar Properties, was down 3.6 percent.
It's a "typical correction," said Issam Kassabeih, senior financial analyst at Menacorp.
Shares of Emaar Properties initially rose, Kassabeih said, after the developer said it signed an agreement with Beijing New Aeropolis Holdings to jointly develop a project around China's Beijing Daxing International Airport.
"But the clarifications provided thereafter emphasized the MOU is not an obligation and does not guarantee any revenue," Kassabeih said.
After the market close, Emaar reported a 3.7% decline in net profit for the first half of the year. Profit was 3.11 billion dirhams, versus 3.23 billion dirhams in the year earlier period.
Outside the Gulf, Egypt's blue-chip index defied the downward trend and closed 0.8% higher. Its largest lender Commercial International Bank acted as the biggest boost for the index, rising 1.6%.
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