Egypt Stocks Top Mideast Slump on Brotherhood Probe, Oil Drop

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Egypt’s stocks led declines in Arab markets after the government froze assets of a company chairman with alleged ties to the Muslim Brotherhood and oil remained below $50 a barrel. Saudi equities also declined.

Egypt’s EGX 30 Index declined 3.2 percent, the most in six weeks, to 7,625.76 at the close in Cairo. Juhayna Food Industries tumbled 7.5 percent and Talaat Moustafa Group Holding lost 5.2 percent. In Saudi Arabia, the Tadawul All Share Index decreased 2.5 percent, led by Jabal Omar Development Co.

A committee in charge of investigating the Muslim Brotherhood has frozen assets belonging to Juhayna Chairman Safwan Thabet as they assess his ties to the group the government considers a terrorist organization. Juhayna isn’t impacted by the decision, it said in a statement last week. The probe comes as plummeting oil prices prompt concern aid from Gulf states, which rely on crude revenue to fund their budgets, could dry up.

On Juhayna, “the bigger worry is that if it will lead to nationalizing of stake,” Allen Sandeep, Cairo-based director of research at Naeem Brokerage, said by telephone in Cairo. Egyptian stocks “are following regional markets on dropping oil, with worries about what it could mean in terms of aid to Egypt.”

Saudi Deficit

Saudi Arabia is OPEC’s biggest exporter, and the nation relies on oil for about 90 percent of its revenue. Brent crude sank 52 percent in the past 12 months to $49.03 a barrel on Friday.

The drop in oil prices drove the nation to raise 20 billion riyals ($5.3 billion) last week as part of a series of bond auctions this year to help plug its budget deficit, which the International Monetary Fund estimates could widen to as much as 20 percent of gross domestic product.

“Market fundamentals are weak along with a negative outlook of oil prices,” Mohammed Al-Suwayed, the head of capital and money markets at Adeem Capital said by phone from Riyadh.

Kuwait’s gauge retreated 0.6 percent and Bahrain’s declined 0.2 percent. Oman’s MSM30 Index lost 0.4 percent.

Dubai Retreats

In Dubai, the DFM General Index fell to the lowest since May 31 after the United Arab Emirates’ biggest publicly-listed builder reported a third straight quarterly loss.

Arabtec Holding Co. slumped 5.4 percent in Dubai to 2.11 dirhams, the lowest since March 26, bringing the decline this year to 24 percent, compared with a 4.2 percent gain for Dubai DFM gauge. Abu Dhabi’s ADX General Index retreated 1.3 percent.

Arabtec, which helped build the world’s tallest tower in Dubai, posted a 718.4 million-dirham loss ($196 million) in the last quarter, compared with a profit of 102.4 million dirhams a year earlier, as expenses rose. Three of the companies’ top executives quit last month as part of a reorganization plan to reduce costs.

Rising costs “indicate that they have been too aggressive in picking and pricing some of the projects,” said Sebastien Henin, who oversees $90 million at The National Investor in Abu Dhabi. “Now they are thinking of project reviews, which means the Arabtec saga continues.”

Last month’s resignations came 13 months after Chief Executive Officer Hasan Ismaik quit and several top managers were dismissed amid speculation the company was losing government backing. The shakeup sparked a selloff in Dubai’s benchmark index, sending the DFM gauge tumbling more than 20 percent in June 2014. The company accounts for about 5 percent of the index.

Arabtec’s loss is “adding to already bearish sentiment in the market,” said Henin, who said he will remain cautious about trading the stock until there’s clarity on the status of the company’s projects and its finances.

U.A.E. equities will see passive outflows of $17 million after the country’s weighting was reduced one basis point to 0.83 percent on MSCI Inc.’s Emerging Markets Index, Cairo-based investment bank EFG-Hermes Holding SAE said last week.

First Gulf Bank PJSC lost 1.7 percent, its fourth day of declines in Abu Dhabi. The bank accounts for 27 percent of Abu Dhabi’s index of equities. Abu Dhabi Commercial Bank PJSC and National Bank of Abu Dhabi PJSC also fell for at least three days.

‘Significant Inflows’

Qatar’s QE Index rose as much as 0.4 percent before dropping 0.1 percent at the close. Qatar’s weighting in MSCI’s emerging markets index will increase and the market could see “significant inflows” following the index provider’s quarterly review, EFG-Hermes said. Ezdan Holding Group and The Commercial Bank QSC will attract a combined $138 million of passive inflows, it said.

Israel’s TA-25 Index gained for a second day, adding 0.4 percent to 1,719.09. The cabinet approved a regulatory framework allowing the development of Leviathan, the country’s biggest offshore natural gas field, and enabling more gas production from the Tamar field.

Delek Drilling LP and Avner Oil Exploration LP, partners in the offshore fields, increased 1.5 percent and 0.8 percent respectively. The TA-Oil and Gas Index jumped 5 percent in two days, the biggest advance since April 6.

“There is optimism in the market that the terms and conditions of the gas framework that is being voted on today will be even more in favor of the gas companies,” Steven Shein, a trader at Psagot Investment House Ltd. in Tel Aviv, said by phone.

The yield on the country’s 1.75 percent bonds due August 2025 fell one basis point to 2.26 percent after rising as much as seven basis points earlier. Israel’s economic growth slowed to an annualized 0.3 percent in the second quarter of the year on declining exports, confounding projections and raising the prospect of central bank intervention to boost output.

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