Dubai Stocks Slump Most Since August as Mideast Markets Recoil

  • Egyptian equities drop to lowest since December 2013
  • Perrigo leads Israeli stocks lower after failed Mylan bid

Disappointing company earnings, falling oil prices and a wave of terrorism culminating in Friday’s attacks in Paris unsettled investors, leading to losses in almost every Middle Eastern market.

Dubai’s DFM General Index dropped 3.7 percent, the most in almost three months, after Drake & Scull International PJSC became the latest United Arab Emirates construction company to report losses. Egypt’s EGX30 Index tumbled 4.2 percent to the lowest since December 2013 and Saudi Arabia’s Tadawul All Share Index sank the most in almost three weeks. The Bloomberg GCC 200 Index, which tracks the top 200 companies in the six-nation Gulf Cooperation Council, closed at the lowest since May 2013.

Drake & Scull joined larger rival Arabtec Holding Co. in reporting losses because of “challenging market conditions” after a more than 40 percent drop in Brent crude prices in the past 12 months led to deferred payments and project declines across the GCC. Oil prices may slide further after stockpiles expanded to a record of almost 3 billion barrels because of strong output from OPEC and elsewhere, the International Energy Agency said on Friday. Most governments in the region rely on income from crude to fund spending.

Bloomberg GCC 200 Index Trades Below 50-, 100- and 200-Day Moving Average
Bloomberg GCC 200 Index Trades Below 50-, 100- and 200-Day Moving Average

Given the retreat in oil prices and deaths in Paris, “it’s been a pretty negative weekend overall and the markets are responding to that,” said Saleem Khokhar, the head of equities at the asset management group of National Bank of Abu Dhabi PJSC, the U.A.E.’s biggest bank. “For us, it doesn’t change the underlying economics of the region.”

Teams of Islamic State-backed gunmen killed 129 people at several sites across the French capital over the weekend, attacks that President Francois Hollande called an “act of war.” A day earlier, the militant group sent suicide bombers to Beirut, killing at least 43 people in two attacks, minutes apart. There’s growing evidence that a bomb may have downed a Russian Metrojet plane over the Sinai peninsula last month.

The attack in Paris was Europe’s worst since the bombings that killed 191 people in Madrid in 2004 and at least 50 people in London the following year. While past incidents sparked selloffs of stocks, shares rebounded days or weeks later. French equities will trade as usual on Monday, the bourse’s spokeswoman Caroline Nico said on Saturday.

GCC Declines

Drake & Scull posted an 877.8 million-dirham ($239 million) attributable net loss in the three months through September, according to a statement to the Dubai bourse on Sunday. The average of three analyst estimates was for a loss of 16.2 million dirhams. The company’s shares slumped 10 percent to the lowest level on record.

“Drake & Scull results are adding oil to the fire,” said Sebastien Henin, the head of asset management at The National Investor in Abu Dhabi.

Dubai’s Shuaa Capital PSC also slumped 10 percent to an all-time low. The investment company reported a third-quarter loss on Thursday after market close, as expenses climbed partly because of provisions for small- and medium-enterprise lending.

Qatar Rises

Qatar’s QE Index climbed 0.3 percent, ending its longest losing streak since 2003. Index provider MSCI Inc. said on Friday it will remove Gulf International Services QSC from its emerging-markets gauge this month and replace it with Qatar Gas Transport Co. Gulf International fell 2.1 percent.

Dana Gas PJSC, the U.A.E. energy company producing oil and gas in Egypt and Iraq, was the second-most traded stock in Abu Dhabi after it posted its biggest quarterly loss since 2009 amid a 47 percent slump in revenue. The company’s shares fell 9.3 percent and Abu Dhabi’s ADX General Index decreased 2.5 percent.

Eshraq Properties Co. was the third-most traded stock in the emirate after it posted a third-quarter loss of 2.7 million dirhams compared with a 109-million dirham profit in the same period last year. Its shares retreated the most since August.

Saudi Arabia’s Tadawul All Share Index decreased 2.9 percent. The stock exchange, the Arab world’s biggest, appointed an acting chief executive officer after Adel Saleh Al Ghamdi resigned. Al Ghamdi oversaw the bourse’s opening to direct foreign investment for the first time in June.

Gauges in Kuwait and Bahrain slipped 1.2 percent and 1 percent, respectively. Oman’s MSM 30 Index lost 0.2 percent.

Egyptian Slump

Egypt’s benchmark gauge fell to a two-year low, with Commercial International Bank Egypt SAE, the nation’s biggest-listed bank, contributing most to the decline. The measure’s 14-day relative strength index dropped to 20 points, the lowest since August and a sign to some investors that it’s oversold.

Growing concern of a step-up in military action against the Islamic State will prompt foreign investors to cut holdings of Middle Eastern stocks, Cairo-based investment bank Pharos Holding said in an e-mailed report Sunday. 

“Even before the Paris attacks we had already started a bearish move, what’s happening around us is just speeding things up,” said Ashraf Akhnoukh, the manager for Middle East and North Africa at Commercial International Brokerage Co., a unit of the country’s biggest listed bank. “Investors are reducing exposure to emerging markets, and Egypt has its own macro problems, which is giving investors more reasons to reduce exposure to this market.”

Standard & Poor’s cut the North African nation’s credit outlook to stable from positive on Friday, reducing the likelihood of a rating upgrade in the near term. The agency, which rates the country B-, cited its expectations for the government to continue to run high fiscal deficits and for Egypt’s Gulf allies to reduce their aid packages.

Perrigo Deal

Israel’s TA-25 Index retreated 2.6 percent, the most in seven weeks. All 25 members fell for the first time since August 23. Leading the descent was Perrigo Co. after the majority of its shareholders rebuffed Mylan NV’s hostile bid, which sent its U.S.-traded shares tumbling.

“There are two reasons stocks are down and both happened on Friday,” said Meir Slater, head of research at Bank of Jerusalem Ltd. in Tel Aviv. “After the Paris attacks, there are fears that this seminal event could impact the global economy, which Israel is an inseparable part of, for some time. Second is Perrigo’s drop after Mylan’s bid failed.”

Exports account for about one-third of Israel’s $304 billion economy.

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