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Gulf markets tumble on Egypt turmoil, contagion fears

Egyptian protesters on the streets again in central Cairo on Sunday, demanding President Hosni Mubarak step down while security forces struggled to contain looters

January 30, 2011 5:24 by

Gulf stock markets tumbled on Sunday as investors, rattled by turmoil in Egypt and concerns the unrest may spread, shed their positions to push indices to multi-week lows.

Egyptian protesters were on the streets again in central Cairo on Sunday, demanding President Hosni Mubarak step down while security forces struggled to contain looters.

Egypt’s bourse was shut on Sunday after falling 16 percent in two days last week. The Egyptian pound has fallen to six-year lows.

Dubai led the Gulf-wide decline as its index fell 4.3 percent to a 21-week low, with companies exposed to Egypt among the biggest decliners.

“Equity premiums in the region are rising to take into account increasing political risk,” said Majed Azzam, AlembicHC real estate analyst in Dubai.

“The uncertainty is making foreign investors question their presence in our markets and there is indiscriminate selling, whether companies are exposed to Egypt or not.”

Emaar Properties, which has four major projects in Egypt including commercial and residential developments near Cairo, fell 8.3 percent. Azzam said about 10 percent of Emaar’s assets are in Egypt.

Emaar said in a statement that it was monitoring the situation closely.

“Emaar is in 18 countries and Egypt is one of the important markets for the company,” Emaar said.

Builder Arabtec and contractor Drake & Scull, both active in the North African state, fell 6.7 and 8.3 percent, respectively.

UAE-based low cost carrier Air Arabia, which flies to four destinations in Egypt and operates a hub in Alexandria, fell 6.1 percent. It was the most active stock on Dubai’s index, accounting for more than a quarter of all shares traded.

“Our flights are operating normally but we had to adjust the timings of flights to ensure it operates outside curfew hours,” said Adel Ali, the chief executive of Air Arabia.

“Any long-term comments would be premature right now. We are watching the situation closely and at present our hub operations are normal.”

In Qatar, the benchmark index fell 3 percent, but rebounded sharply from an eight-week intraday low and like markets in Dubai, Abu Dhabi, Kuwait and Qatar, Doha’s bourse ended near its intraday peak, indicating some buyers returned following an initial sell off.

“Everybody was nervous before the (Qatar) market opened and some investors wanted to sell their entire exposure to Middle East markets – there was an over-reaction,” says Robert Pramberger, acting head of asset management at Doha-based investment firm The First Investor.

“As the day progressed, investors bought back into stocks at more attractive levels. Listed Qatar companies do not have much exposure to Egypt and if you think risk is from Egypt alone and unrest will not spread further, there is a good buying opportunity.”

Oman fell 3 percent, Kuwait dropped 1.8 percent and Abu Dhabi lost 3.7 percent.

“There’s an assumption from foreign investors that unrest could spread to other countries in the region and that is risk they don’t want to participate in,” said Robert McKinnon, ASAS Capital chief investment officer.

“It is a matter of how things in Egypt play out over the next week, which is very difficult to predict — when everybody is scared, it is maybe a good time to take on risk, but there are so many permutations of what could happen politically in Egypt.”

Mubarak named his military intelligence chief as his first ever vice-president on Saturday in a move some observers interpreted as a step towards a handover but others saw as a sign of quite the opposite.

Saudi Arabia’s index fell to a three-month low in initial trade, but subsequently rose to be up 2.6 percent at 1103 GMT, rebounding following Saturday’s 6.4 percent drop, its largest in eight months.

“Saturday’s selling was an emotional reaction to what happened in Egypt and there will be more selling … as some people weren’t able to sell yesterday because of market restrictions,” said Youssef Kassantini, a Saudi-based financial analyst.

“However, there is a good buying opportunity and the market should find a bottom today.” (Additional Reporting by Praveen Menon, editing by Amran Abocar and Firouz Sedarat)

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