Most stock markets in the energy-rich Gulf slumped on the week's opener on Sunday as intervention by governments failed to restore sentiment among investors worried by global financial turmoil. Riyadh cut interest rates for the third time in six weeks, slashing the repo rate by one percentage point a day after the Saudi bourse-the region's largest-sank more than nine percent.
Kuwait and Oman last week set up special funds to buy stocks on the sagging markets while the United Arab Emirates on Saturday announced the start of a process to merge two leading real estate finance firms. All seven regional markets dropped, with Dubai, Doha and Saudi shares leading the way.
"I think there is much negative sentiment in the Gulf bourses because of the flurry of (bad) news from the international markets," head of economic research at Kuwait's Global Investment House, Faisal Hasan, told AFP.
"There was also a contagion effect from the slump of the Saudi market," on Saturday. The Saudi bourse is open from Saturday to Wednesday while other Gulf stock exchanges operate from Sunday to Thursday. The Saudi Tadawul All-Shares Index (TASI), which dived 9.2 percent on the week's opener on Saturday, slid another 3.8 percent to 4,264.52 points, a near five-year low, despite the news of the rate cut.
The TASI has plummetted 12.6 percent in the last two days and is down 61 percent on the year. The index was pulled down by the banking and petrochemicals sectors which dropped 4.7 percent and 1.9 percent, respectively, while Telecoms dived 7.1 percent. Market leader SABIC dropped 3.6 percent. The market failed to react to news that the Saudi Arabian Monetary Agency (SAMA) has cut the repurchase (repo) rate, the kindgom's benchmark interest rate, to 3.0 percent, barely half its 5.5 percent level before the cuts began.
SAMA also cut the mandatory reserve for local banks from 10 percent to seven percent, freeing huge liquidity for banks to lend. The measure is estimated to release 16 billion dollars for lending. In the United Arab Emirates, the Dubai Financial Market dived 4.7 percent to 1,917.15, the lowest level in more than four years, pulled down by the market leader, property developer Emaar which shed 7.8 percent.
Emaar stock closed at 2.73 dirhams (0.74 dollars), its lowest in well over four years. The share has shed more that 81 percent this year. The real estate sector lost 7.6 percent.
Dubai's sister market, the Abu Dhabi Securities Exchange, dropped 1.26 percent to 2,797.76 points as the leading real estate sector shed 2.5 percent and energy sector dropped 6.1 percent.
The two markets were unimpressed by news that Amlak Finance and Tamweel, two Dubai-based property finance firms with assets of around seven billion dollars, have begun a merger process. Shares of the two were suspended on the Dubai market. The merger will establish a real estate finance bank compliant with Islamic Sharia rules. The Kuwait Stock Exchange, the second largest Arab bourse, closed down 0.75 percent at 8,809.30 points despite a 1.1 percent increase by the leading banking sector. Doha Securities Market ended the day four percent weaker at 5,575.81 points, a two-year low, while Muscat Securities Market dropped 2.6 percent.
Bahrain Stock Exchange finished 0.85 percent lower. Hasan believes it may be some time yet before markets in the Gulf region start to recover strongly.
"I think we are near to the bottom, but stocks are likely to remain volatile for some more weeks," the analyst said. The sharp slide in the price of oil, the main source of income for Gulf states, is negatively affecting investor sentiment over fears about its impact on Gulf economies. Benchmark crude oil prices have plunged by two thirds from their record highs above 147 dollars a barrel in July.
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