Saudi Slumps To 3-Week Low As Oil Drop Weighs On Gulf Markets

Saudi Arabia’s stock index slumped to a three-week low on Wednesday as weak oil prices sparked a sell-off in Gulf markets.
The Saudi benchmark ended down 1.6 percent at 9,629 points, although late buying helped it rebound from an intra-day low of 9,436. That improvement coincided with gains in U.S. stock futures after Republicans secured control of the U.S. Senate in mid-term elections.

The Saudi bourse ceases trading at 1230 GMT and so can react to U.S. pre-market indicators, whereas other Gulf markets close hours earlier and so were more affected on Wednesday by gloomy Asian stocks and downbeat oil prices.

Egypt’s bourse closes at the same time as the Saudi market and followed the same pattern, mounting a late rally to trim its losses to 0.4 percent as it eased from Tuesday’s four-week high.

“Regional markets are following what’s going on in the major markets, except that in recent days they have underperformed due to the weakness in oil prices,” said Sanyalaksna Manibhandu, manager of research at NBAD Securities in Abu Dhabi.

The slide of oil prices and Saudi stock prices again appeared to prompt unusually large fund outflows in the Saudi foreign exchange market, causing the spot riyal rate to trade unusually far beyond its peg and the riyal to drop in the forwards market too, although the fall was not as steep as it was last month.
In Riyadh, Mobily tumbled 9.7 percent to 65 riyals. That took the telecommunications operator’s losses to 18.5 percent since Monday’s shock decision to cut its profits for 2013 and the first half of 2014 by a combined 1.43 billion riyals ($381.2 million) because of accounting errors. Mobily’s third-quarter profit plunged 71 percent.

“Mobily was well traded by institutions and retail investors,” said Manibhandu. “Those people who might say ‘the stock has gone down quite a bit, let’s get back in’ will wait until there’s more clarity.”

Mobily has lost credibility in the eyes of investors and investment banks, said Mohammad Omran, a member of the Saudi Economic Association, especially as the firm also cut its second-quarter profit by 339 million riyals after Etihad Atheeb scrapped a deal between the two.

Atheeb instead tied up with former monopoly Saudi Telecom Co (STC), which has turned around its operations after its annual profit slumped to a 10-year low in 2012.

“I think there will be a reallocation of money out of Mobily and into STC – Mobily had been seen as a more quality investment than STC,” said Alhassan Goussous, a Saudi market specialist. STC’s shares slid 1.2 percent on Wednesday.

Abu Dhabi’s Etisalat, which owns 27.5 percent of Mobily, will cut its profits by 162 million dirhams ($44.11 million) because of the affiliate’s earnings debacle, it said on Wednesday.

Etisalat’s shares, which can only be owned by United Arab Emirates citizens, are down 0.9 percent since Monday. Abu Dhabi’s index has lost 2.4 percent over the same period.

DUBAI, KUWAIT

Dubai’s index fell 3.3 percent to a two-week low of 4,401 points, trimming its 2014 gains to 30.6 percent. It surged 108 percent in 2013.

Gainers outnumbered losers 21 to one, with property-related stocks among the hardest hit. Contractor Arabtec fell 5.7 percent and Union Properties slid 4.0 percent.

“When investors are risk-off, the markets where they have the most profits to take suffer the most,” said Manibhandu.

Kuwait Food Co (Americana) fell 3.3 percent after resuming trade following a near two-month suspension because of the possible sale of a controlling stake in the company.

Americana repeated in a statement on Tuesday that a major shareholder was in preliminary talks with “various parties” to sell its stake, but warned several factors could still prevent a deal and that the pricing was not clear.

Americana’s shares had last traded on Sept. 16; since then, Kuwait’s main stock index has fallen 5 percent.

WEDNESDAY’S HIGHLIGHTS

SAUDI ARABIA

* The index fell 1.6 percent to 9,629 points.

EGYPT

* The index dropped 0.4 percent to 9,496 points.

DUBAI

* The index fell 3.3 percent to 4,401 points.

ABU DHABI

* The index dropped 2.4 percent to 4,831 points.

QATAR

* The index fell 2.0 percent to 13,529 points.

KUWAIT

* The index dropped 1.4 percent to 7,193 points.

OMAN

* The index fell 1.3 percent to 6,917 points.

BAHRAIN

* The index eased 0.2 percent to 1,444 points.

Source: Reuters