World Cup Questions Send Qatari Stocks Lower as Dubai Retreats

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Qatari stocks declined a third day as investors continued to fret over whether the Gulf nation will retain the right to host the soccer World Cup. Most Middle Eastern equity markets also retreated.

The QE Index dropped 0.9 percent to 11,981.98, only the second time since April it has closed below the 12,000 level. The gauge earlier slumped as much as 2 percent before a late rally pared losses. Industries Qatar QSC led the slide with its biggest retreat since January.

Speculation is growing that Qatar could lose the right to host the world’s most-watched sporting event if allegations that the bidding process is corrupt are found to be true. Sepp Blatter last week announced his resignation as president of FIFA, soccer’s global governing body, after U.S. prosecutors indicted its officials and Swiss authorities started a probe into the awarding of the 2018 and 2022 competitions to Russia and Qatar, respectively. The tiny Gulf nation is spending about $200 billion on infrastructure in the run-up to the event.

“With the investigation ongoing and the sudden resignation of Blatter, there’s still uncertainty with how the story will play out,” Ramez Merhi, a Dubai-based director for asset management at Al Masah Capital Ltd., which manages $500 million, said by e-mail. Investors will “handicap Qatari stocks until the investigation is over,” he said.

Holy Month

Dubai’s DFM General Index dropped 1.1 percent as investors took advantage of a four-day rally to sell positions before the start of the Muslim holy month of Ramadan. Developers and construction companies led the slide, as Emaar Properties PJSC lost the most since May 27. The DFM Real Estate Index sank 1.4 percent, its biggest decline in a week.

“We are seeing some profit taking in Dubai this morning,” Merhi said. “With Ramadan on our doorstep and summer upon us, we expect volumes to dry up while people partake in the holiday season.”

Ramadan, when Muslims fast from dawn to dusk and most employees in the six-nation Gulf Cooperation Council work reduced hours, starts next week. Trading volumes across the region typically decline, increasing volatility.

Shares of Amlak Finance PJSC, an Islamic mortgage provider that isn’t in Dubai’s benchmark index, rose 15 percent to 1.54 dirhams in a third day of gains. The stock, which resumed trading last week after a six-and-a-half year suspension, has increased 51 percent in the period.

Risk Appetite

The Tadawul All Share Index in Saudi Arabia, which will begin allowing direct foreign investment next week, dropped 0.8 percent. Bahrain’s BB All Share Index fell less than 0.1 percent and Oman’s MSM 30 Index slipped 0.1 percent. Egypt’s EGX 30 Index lost 0.6 percent. Kuwait’s SE Price Index added 0.1 percent.

“A number of factors are a concern to investors” in the region, Saleem Khokhar, the head of equities at National Bank of Abu Dhabi PJSC’s asset management group, said by e-mail. “Greece is still an issue, and strong U.S. jobs data is increasing the likelihood of a rate rise in September or October.”

The MSCI Emerging Markets Index dropped for a 10th day on June 5, posting the longest streak of losses since November 2013. A U.S. Labor Department report last week showed payrolls jumped in May by the most in five months, supporting the case for the Federal Reserve to raise interest rates. Record low borrowing costs have bolstered demand for riskier assets, including developing market equities.

Opko Buy

Israel’s TA-25 Index rose 0.4 percent to 1,703.32 after losing as much as 0.8 percent earlier in the day.

Opko Health Inc. retreated 7.1 percent. The company on Thursday said it agreed to buy Bio-Reference Laboratories Inc. for about $1.47 billion in stock. The stock tumbled 15 percent in U.S. trading that day.

Israel’s government bond due March 2024 dropped a fifth day as the yield increased six basis points to 2.17 percent, the highest in five months on a closing basis.

“The rise in local government bond yields is tracking the move in U.S. yields over the weekend, which was driven mainly by the U.S. jobs data,” Effi Cohen, a bond trader at Leader Capital Markets Ltd. in Tel Aviv, said by telephone.