Saudi Arabian Stocks Lead Mideast Slump as Oil Extends Decline

Is Infighting Amongst Saudi Royals a Possibility?
  • Crude tumbles 4 days running, touches lowest since April 2004
  • Tadawul All Share Index tumbles as much as 5 percent

Saudi Arabian stocks led a decline in Middle Eastern markets as the slump in oil prices deepened amid a global equity rout spurred by the financial turmoil in China.

The Tadawul All Share Index slid as much as 5 percent before paring its decline to 4.5 percent to 6,225.22 at the close. The DFM General Index retreated 3.4 percent, the most in almost two months, to the lowest level since Dec. 15. The Bloomberg GCC 200 Index, a gauge that tracks the 200 largest stocks in the six-nation Gulf Cooperation Council, declined for a fifth day to the lowest since January 2013.

Stocks and currencies went into a tailspin Thursday as China cut the yuan’s reference rate by the most since August, triggering a selloff that led to the halting of stock trading in the nation for the second time in three days. Concern that Chinese authorities are struggling to shore up the economy is driving crude closer to $30 a barrel. The GCC countries are home to about 30 percent of the world’s proven oil reserves, and its governments rely on energy revenue to help fund spending.

Source: Bloomberg
Source: Bloomberg

China is "a major oil importer, and any further weakness in its economy will put more pressure” on Gulf economies, said Tariq Qaqish, the head of asset management at Dubai-based Al Mal Capital PSC. "The global economic outlook and specifically China’s weak manufacturing numbers and its impact on stock markets are fueling the negative sentiment across the board."

Brent crude, a pricing benchmark for half the world’s oil, dropped to $33.18 a barrel at 6:42 p.m. Riyadh time. More than a third of China’s crude imports come from GCC nations, according to the latest data compiled by Bloomberg.

‘Long Overdue’

China is one of the biggest trading partners of Saudi Arabia, the world’s biggest oil exporter, and the United Arab Emirates, data compiled by Bloomberg show.

Saudi Basic Industries Corp. dropped 3.9 percent. The company, one of the world’s largest chemicals manufacturers, was trading at the lowest level since August 2009. Three technical indicators were this week suggesting the share may be ready to rebound. The yield on Sabic’s 2.625 percent bonds due October 2018 rose 21 basis points to highest level on record.

Saudi Cable Company, a Jeddah-based cable and reel manufacturer, fell to the lowest since March 2003. The company said on Wednesday it expects a 3 percent impact on output costs from Saudi Arabia’s subsidy cuts.

Iran-Saudi Tension

Stocks in the region have been under further strain as relations between Shiite-majority Iran and Arab nations worsened. The Saudis on Saturday executed 47 people accused of terrorism-related activities, including a Shiite cleric, which prompted protesters to attack the kingdom’s embassy in Tehran. In turn, Saudi Arabia and a number of its allies cut diplomatic ties with the Islamic Republic.

“With oil going the way it is and China reacting the way it is reacting and the tension between Iran and Saudi, it was very much expected, long overdue,” Ahmed Shehada, executive director for advisory and institutions at NBAD Securities LLC, said by phone from Dubai. “The market is looking quite bearish.”

The yield on Dubai’s government bond due October 2020 rose 10 basis points to the highest level since January 2015. Emaar Properties PJSC, the company with the biggest weighting on the emirate’s main stock index, was the largest contributor to the gauge’s retreat. The developer sank 5.4 percent, the most since Aug. 23.

Qatar’s QE Index slid 3 percent and Abu Dhabi’s ADX General Index lost 3.2 percent, the most since August. Kuwaiti stocks decreased 1.6 percent and Bahraini equities lost 0.7 percent. Oman’s MSM 30 Index dropped 0.5 percent.

Turkey Slides

Turkey’s Borsa Istanbul 100 Index climbed for a third day. The lira was set for its first gain in five days.

Israel’s TA-25 Index dropped 1.9 percent. The declines were led by Opko Health Inc. and Teva Pharmaceutical Industries Ltd., tracking the losses of their U.S.-traded shares.

Markets in Egypt were closed for a public holiday.

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