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Most Mideast markets stumble on oil, euro worries

Most Middle East markets fell Monday on concerns of euro zone debt crisis and a drop in oil prices.

May 18, 2010 10:06 by

Most Middle East markets extended losses on Monday, tracking declines in oil prices and world equities as a euro zone debt crisis sparked fears of a weakening global recovery.

“Regional markets are obviously following global markets and this correlation has increased drastically — whenever there’s a global crisis, regional markets take their cue from that,” said Shakeel Sarwar, Sico investment bank head of asset management.

“The link is much stronger on the downside than the up.”

Saudi Arabia’s Tadawul All-Share Index (TASI) fell 0.5 percent, its third straight loss, as declining oil prices weighed on sentiment in the world’s top oil exporter.

Saudi stocks trimmed losses by the close, however, matching a slight recovery in oil prices. The market closed at 6,494.08 with a loss of 32.37 points.

Sector activity was negative with only one sector closing, namely the Energy & Utilities, with a gain of 0.49 percent. Losses ranged from 0.08 percent by the Insurance sector to 1.42 percent by the Transport sector. Saudi Basic Industries Corp (SABIC) fell 0.5 percent and Saudi Fertilizers Co. lost 2.2 percent. The overall market breadth was negative with 34 advancers against 93 decliners giving it an AD ratio of 0.36, the Financial Transaction House (FTH) said in its daily market commentary.

“As long as oil prices remain volatile, regional markets will get hit,” said Sarwar. “The euro zone crisis is transmitted to this region through oil. It could be pointing to a possible double-dip global recession or an extreme slowdown in the global economic recovery.” If either of these scenarios were to occur, oil prices would fall further, weighing in on regional markets, Sarwar said.

Oil was down 0.4 percent at $71.34 a barrel at 1326 GMT, having touched a 14-week intraday low of $69.82 in earlier trading, while world stocks fell and the euro slumped to a four-year low.

A late rally helped Dubai’s index rebound from a technical support to end higher for a third session in four as investors bought in ahead of a possible deal on Dubai World’s debt restructuring.

Emaar Properties climbed 1.6 percent and Dubai Financial Market added 1.8 percent.

“If Dubai World news comes out, it will enable our markets to move away from international markets for 4-5 days,” said Mohamed Khaled, Prime Emirates relationship manager.

On May 9, a top Dubai official said a deal between creditors and indebted state-owned conglomerate Dubai World could be finalized within two weeks.

Oman’s index fell 1.3 percent in its biggest decline of 2010 as bank stocks tumbled. “Sentiment is pretty pathetic globally and that is being reflected here in Oman,” said Sayed Quadry, a vice-president at Amwal Investment in Muscat. “A lot of people are selling and just getting out of the market because of global uncertainty.”

Kuwait rose 0.5 percent, its third gain in four.


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