Banks led Saudi Arabia's stock market sharply lower on Sunday for a third session in a row, while gains in financial shares helped keep Egypt's benchmark index at a four-month high. Investment bank EFG Hermes said last Wednesday that the investment case for Saudi banks was no longer "compelling" against a backdrop of receding passive fund flows and the emergence of credit quality concerns among others.
The Saudi index lost a further 1.3% on Sunday, reaching its lowest Since January, and driven down by a 2.6% fall in Al Rajhi Bank and a 3.5% drop in National Commercial Bank. However, Bank Aljazira rose 0.7%, the only gainer amongst the lenders.
Middle East funds plan to reduce investment in Saudi Arabia, a Reuters poll showed last week, displaying a bearishness that has carried over from last month. Saudi Arabia's benchmark index 8.2% in August, its worst monthly performance this year. The market's 2019 gains were as high as 20% in May, outperforming most regional markets ahead of the inclusion of Saudi stocks in the MSCI index, which attracted billions of dollars from foreign investors.
They have been net buyers every month this year.
On Wednesday, a second batch of Saudi shares was added to the MSCI emerging markets index, though the event failed to provide upward momentum for Saudi stocks as receding fund inflows kept investors at bay.
Egypt's blue-chip index added 0.7% on Sunday, continuing to hover at a four-month high, with Commercial International Bank increasing 1%.
Egyptians were net buyers of stocks during the session and non-Arab foreigners were net sellers, according to the stock exchange.
The Abu Dhabi index fell 0.9%, mainly pressured by the United Arab Emirates' largest lender First Abu Dhabi Bank which was down 1.3%.
The Qatar index added 0.2% with Qatar Islamic Bank, the Gulf state's largest shariah-compliant lender by assets, gaining 2.5% and Industries Qatar rising 2.2%.
In Dubai, the index traded flat as gains in the real estate sector were marred by losses in the financial division. Emaar Properties, the emirate's largest listed developer, closed 1% higher, while Emirates NBD declined 0.9%. Oman was closed for a public holiday.