Gulf stocks fall as oil drops; banks soft despite rate rises

A decline in crude oil prices to November lows put pressure on Gulf bourses on Thursday morning, while banking shares reacted little to interest rate hikes in the region following the U.S. Federal Reserve’s move overnight.

Riyadh’s stock index went down 0.3 percent after half an hour after Brent crude dipped below $47 a barrel; half of the 14 listed petrochemical producers fell, with PetroRabigh down 0.9 percent.

But small propylene maker Alujain surged 6.7 percent after it announced that minority shareholders had voted to remove the current board of directors and an election of new members would take place on Thursday.

National Commercial Bank edged up 0.1 percent after its board recommended a cash dividend of 1.1 riyal per share for the first half of the year, up from the 0.6 riyal paid out for the prior-year period.

The Saudi central bank responded to the U.S. Federal Reserve’s 25 basis point rate hike by lifting its reverse repo rate, at which commercial banks deposit money with the central bank, by the same amount to 1.25 percent but keeping its repo rate, used to lend money to banks, unchanged at 2.00 percent.

This is expected to be net positive for Saudi banks’ margins, but shares of other lenders were mostly lower on Thursday because the move had largely been priced in. Alawwal Bank fell 0.7 percent.

In Abu Dhabi, mid-sized banks were the main laggards despite the United Arab Emirates central bank’s rate hike with Sharjah Islamic Bank dropping 2.7 percent and Abu Dhabi Islamic Bank down 0.8 percent. The index was down 0.3 percent.

In Dubai, Dubai Islamic Bank lost 0.5 percent. Emaar Properties fell 0.6 percent to 7.85 dirhams after profit-taking from a rally this month triggered by its plan to spin off its local real estate unit. The Dubai index edged down 0.3 percent.

Banks in Qatar, which have been beaten down by the sanctions imposed on Doha by four Arab states last week, were mixed. Large-cap Islamic lender Masraf Al Rayan was up 0.4 percent but Qatar Islamic Bank fell 1.2 percent. The index was down 0.1 percent.

Doha’s central bank has not yet announced its decision on interest rates. After the Fed’s last hike in March, it was much slower than the other Gulf central banks to announce it was following soon, only doing so in the late afternoon of the next day.

Source: Reuters