Gulf Arab markets fell on Tuesday as Japan faced up to a potential nuclear catastrophe and Bahrain declared martial law in the island kingdom. "The whole focus is on risk aversion trade what's happening in Bahrain and Japan," said Matthew Wakeman, EFG-Hermes managing director for trading. "I think investors realised they entered the market too strongly last week."
Gulf markets rallied hard to Sunday's close, recovering from early-March multiyear lows, but this trend has reversed again and further declines are forecast. Shares in Saudi Arabia, the world's top oil exporter, slid 3.5 percent. Crude was down 3.5 percent at $97.69 per barrel at 1225 GMT.
"The net effect of Japan on Saudi Arabia will be negligible - it's more of a sentiment thing, with crude falling," said a Riyadh-based trader who spoke on condition of anonymity. "There's a lot of value in the Saudi market. If there's a big sell-off in petrochemicals I would get buying with an eye on Q1 earnings." Petrochemicals firm are expected to post strong quarterly results after oil prices spiked in early March, with crude seen as a proxy for both petrochemicals prices and demand.
Saudi Basic Industries Corp, which is active in Japan, dropped 5.3 percent, SABB fell 4.1 percent and Zain Saudi lost 9.9 percent. Wednesday is the final trading day of the Saudi week. Bahrain has declared martial law, a day after Saudi forces arrived in the Sunni-ruled kingdom to help restore calm following weeks of protests by the island's Shia majority. The United Arab Emirates has also dispatched 500 police officers as Gulf Arab leaders try to quell rising dissent.
The cost of insuring Bahraini sovereign debt against default jumped to its highest since July 2009, but Bahrain's index rose 1.3 percent. Five stocks traded, with 673,000 shares changing hands in total. Dubai's index fell 1.9 percent to be down 11.3 percent in 2011. Foreign investors are largely absent from UAE bourses and are sitting "low to see if there is a massive panic shakeout," said EFG's Wakeman, adding some local investors were bottom-fishing for over-sold stocks. Political developments will dictate UAE market direction over the next week, he added. Dubai Financial Market fell 5.7 percent after its fourth-quarter profit plunged 93 percent.