The Persian Gulf Arab states (Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, Bahrain, and Oman) bourses declined in early trade on Tuesday as Brent crude nose-dived towards $30 and weak Asian markets drained regional risk appetite.
Brent crude was down 3.2% at $30.53 as analysts scrambled to cut their 2016 oil price forecasts and traders bet on further price falls, Arabian Business reported.
Dubai's bourse fell 1.7%, taking its 2016 losses to 8.2%, as investors sold off property-related stocks in early trade.
Builder Arabtec declined 2.4%, giving back some of Monday's 3.5% gain.
Emaar Properties and Deyaar Development also retreated, falling 3.6 and 1.2% respectively.
Banks weighed on Abu Dhabi's index, which slid 0.6%, as investors worried about lenders' profitability ahead of fourth-quarter earnings season. Abu Dhabi Islamic Bank and First Gulf Bank fell 4.0 and 0.9% respectively.
Standard & Poor's said it expects lower earnings for banks in the United Arab Emirates in 2016 and a lackluster performance in 2017.
"We believe uncertainty about how long oil prices will remain weak will force businesses and government to adopt a conservative stance, which will weaken spending for infrastructure and private sector investments, and rein in bank lending," S&P added.
In Qatar, the benchmark fell 1.1% as all traded stocks declined.
Energy-related companies Gulf International Services and Qatar Gas Transport each retreated more than 1.4%.
Asian stocks held near four-year lows as investors worried over the extent of China's economic slowdown and its impact on emerging markets.
Capitalization Drops 11.4%
(P)GCC markets' capitalization shrank $97.8 billion in 2015 as equities underperformed most international peers with the MSCI (P)GCC total return index retreating 15% during the year, its weakest performance since 2008, TradeArabia quoted a report as saying.
An economic update from the National Bank of Kuwait, said (P)GCC market capitalization shrank last year as market correction followed three years of solid performance. While regional markets fared worse than their international counterparts, equities in general were thrashed in 2015.
But a report by Global Investment House said the combined (P)GCC market capitalization dropped 11.4% year on year to $856.3 billion in 2015 from $954.2 billion in 2014.
The Saudi bourse, which registered a 7.1% fall in market capitalization, was the biggest contributor to the overall market capitalization ($20.8 billion or 49.1%), followed by the Qatari bourse, the Abu Dhabi and Dubai bourses.
Trading across (P)GCC markets declined in 2015, Global Investment House said. The volume and value of shares traded fell 33.5% and 31.5%, respectively, owing to a fall in trading activities across members due to weaker sentiments over the fall in oil prices during the year. NBK report said regionally, lower oil prices remained the main driver of markets.
"Oil prices and (P)GCC equities have moved largely in tandem since oil prices started retreating in the second half of 2014. The relationship has been far from symmetrical, with correlations increasing notably whenever oil prices took a dive."
Saudi Sinks Most
Saudi Arabian stocks led Persian Gulf Arab markets lower after oil extended its slump from the lowest close since 2004, Bloomberg reported.
The Tadawul All Share Index dropped 2.5% to 6,022.04 in Riyadh, poised for the lowest level since October 2011. The DFM General Index in Dubai retreated 2.1%, bringing its eight-day loss to 8.7% and its 14-day relative strength index below 30, a sign to some investors the gauge is oversold. Qatar’s QE Index slid 1.4% to the lowest level in more than two years.
The slide in oil prices has raised concern that economic growth in the six-nation (Persian) Gulf Cooperation Council, home to about 30% of the world’s proven crude reserves, may stall, curbing company profits as income from energy falls.
“We are not at a stage where investors are looking for value, they are concerned what happens to earnings if oil remains at about $20 for a few years,” said Tariq Qaqish, the head of asset management at Dubai-based Al Mal Capital PSC. “The recent drop is significant. It’s impacting investor confidence and growth potential for the region.”
The Bloomberg (P)GCC 200 Index, which tracks the region’s top 200 companies, fell 1.6% to the lowest level since December 2012. Abu Dhabi’s ADX General Index declined 1% and Kuwaiti stocks lost 0.5%.
