Saudi stocks keep falling on economy fears, UAE firm

Most Gulf stock markets dropped Thursday with Saudi Arabia sliding for a fifth straight day, led by banks, but United Arab Emirates bourses were firm.

The Saudi index, which on Wednesday fell below minor technical support on the April low of 6,066 points, sank 0.9 percent on Thursday to a six-month closing low of 5,977 points. Turnover was thin; this week’s volume was the lowest in 2016.

That is partly because summer holidays have kept retail investors away. Investors are also worried about the impact on corporate earnings of Saudi Arabia’s economic slowdown due to low oil prices.

“Liquidity is very poor. To complete relatively small sell orders, traders are being forced to push prices lower. And because of weak sentiment, buyers are not being attracted despite the lower prices,” Akber Khan, senior director for asset management at Qatar’s Al Rayan Investment, said of the Saudi market.

Retail investors were also concerned by tensions between Saudi Arabia and Iran, he added.

Al Rajhi Bank slid 2.3 percent. Investors are fretting about the impact of a severe slump in the Saudi construction sector on the quality of bank loans. Cement shares, exposed to the construction industry, were also weak with Yamamah Cement dropping 3.8 percent.

In Qatar, the index dropped 0.5 percent with oil drilling rig provider Gulf International Services sinking 1.4 percent.

Qatar’s gross domestic product, adjusted for inflation, grew only 1.1 percent from a year earlier in the first quarter, the slowest growth since at least 2011, official data published on Thursday showed. Both the oil and gas sector and the rest of the economy shrank from the previous quarter.

However, Khan said that although Qatar’s index had dropped back in the last few days, the market had continued to see net inflows of foreign funds in anticipation of its upgrade by FTSE to emerging market status in mid-September.

Such inflows have totalled about $400 million since the start of July and have been positive on every day except July 14, when there was a small net outflow, he said.

After early drops, markets in both Dubai and Abu Dhabi closed higher; the UAE is widely seen as more resilient to low oil prices than Saudi Arabia because of its diversified economy and Abu Dhabi’s huge financial reserves.

Dubai’s index closed 0.3 percent higher as GFH Financial, the most heavily traded stock and a speculative favourite of local retail investors, surged 3.0 percent.

Emirates NBD lost 0.6 percent. Sources told Reuters on Wednesday that Emirates Islamic, the sharia-compliant arm of ENBD, had laid off more than 100 people as part of cost-cutting to adjust to a cooler economy.

Abu Dhabi’s index edged up 0.2 percent as blue chip Aldar Properties added 1.5 percent.

THURSDAY’S HIGHLIGHTS

SAUDI ARABIA

* The index fell 0.9 percent to 5,977 points.

DUBAI

* The index rose 0.3 percent to 3,492 points.

ABU DHABI

* The index edged up 0.2 percent to 4,520 points.

QATAR

* The index dropped 0.5 percent to 11,135 points.

KUWAIT

* The index edged down 0.1 percent to 5,429 points.

OMAN

* The index dropped 0.5 percent to 5,823 points.

BAHRAIN

* The index fell 0.6 percent to 1,146 points.

Source: Reuters