Saudi Arabian stocks plunged into a bear market after OPEC took no action to stem a slump in oil, triggering a rout in the Middle Eastern equities, Bloomberg reported.
The Tadawul All Share Index retreated as much as 6.3 percent, the most since March 2011, before settling 4.8 percent lower at the close in Riyadh. The measure for the Arab world’s biggest bourse has slipped 23 percent to 8,624.89 from a high on Sept. 9. Dubai’s DFM General Index fell 4.7 percent, the most since Oct. 16. Abu Dhabi’s ADX General Index declined 2.6 percent, Oman’s MSM 30 Index lost 6.2 percent and Qatar’s QE Index fell 4.3 percent.
Oil tumbled to the lowest since May 2010 after the 12-nation Organization of Petroleum Exporting Countries maintained its collective production ceiling of 30 million barrels a day. Brent crude, the benchmark for more than half the world’s oil, lost 13 percent last week, the biggest weekly plunge since May 2011, to $70.15 a barrel. Saudi stocks are tumbling four months after the country announced plans to give foreigners access to the bourse for the first time.
“Investors don’t like the potential macro backdrop if oil continues to slide, which is being reflected in the markets,” Ali Khan, chief executive officer of London-based BGR Asset Management LLP, said. “Investors are afraid if oil stays where it is, it will negatively impact the government revenues, thus creating potential headwinds on government spending.”
Spending Plans
Saudi Arabia, OPEC’s biggest oil exporter and the largest Arab economy, has spending plans valued at more than $500 billion. It needs prices to average $99.2 a barrel this year to balance its budget, according to Deutsche Bank AG. The six-nation Gulf Cooperation Council, which includes Saudi Arabia and the UAE, is home to about a third of the world’s proven oil reserves.
Saudi Arabia, Oman and Bahrain risk running budget deficits next year if their spending plans aren’t adjusted to reflect the decline in crude prices, Masood Ahmed, director of the Middle East and Central Asia department at the International Monetary Fund, said last month.
The desert kingdom is opening one of the most restricted stock exchanges as King Abdullah pushes to diversify the economy from oil and create new jobs. It plans to grant foreigners, who are barred from directly buying and selling domestic assets, access to the $522 billion market next year.
RSI Drops
The country’s bourse may be added to MSCI Inc.’s developing-markets gauge by 2017 at the earliest, Sebastien Lieblich, executive director at MSCI Index Research, said in July, adding the nation may account for about 4 percent of the index.
The Tadawul’s 14-day relative strength fell to about 21, the lowest since March 2011. A level below 30 indicates to some analysts that securities have fallen too far and are poised to rise. The index declined 14 percent in November, the biggest monthly slump since 2008.
Saudi Basic Industries Corp., the world’s largest petrochemicals producer and the stock with the second-highest weighting on the kingdom’s main gauge, fell 9.9 percent, the steepest decline since May 2010, to 88.25 riyals. Al Rajhi Bank, the biggest Saudi lender by market value, declined to 59.18 riyals, the lowest in two years.
‘Panic Selling’
In the UAE, home to the third-largest proven oil reserves in the GCC, the Dubai Islamic Bank PJSC retreated 6.6 percent. Emaar Properties PJSC, the developer of Dubai’s Burj Khalifa, the world’s tallest tower, slumped 3.2 percent. Arabtec Holding Co. dropped 7.3 percent.
Amanat Holdings PJSC, a Dubai startup investment company, declined 12 percent in its trading debut, even after Chairman Faisal Bin Juma Belhoul said the company is seeking double-digit rates of return on investments.
“It’s mostly panic selling today,” Tariq Qaqish, head of asset management at Dubai-based Al Mal Capital PSC, said by phone. “Investors are worried about a possible slowdown in government spending, which would affect corporate earnings going forward.”
