Panic sell-off sends Gulf stocks tumbling after OPEC decision

Panic sell-off sends Gulf stocks tumbling after OPEC decision
Updated 30 November 2014

Panic sell-off sends Gulf stocks tumbling after OPEC decision

Panic sell-off sends Gulf stocks tumbling after OPEC decision

Gulf stock markets plunged to new lows in a panic sell-off on Sunday after OPEC decided to maintain oil output in a move that sent crude prices crashing to five-year lows, analysts said.
Saudi Arabia's stock exchange (Tadawul), where petrochemicals account for almost a third of total earnings, took the biggest hit among major markets, dropping 4.76 percent to 8,624.89 points, its lowest close since early January.
"This is a direct response to the oil price correction,” a regional analyst said.
“There is a good chance that prices will begin to stabilize now that the near-term fundamentals are known,” the analyst added.
Commenting on Tadawul’s fall, John Sfakianakis of Ashmore Group, told Arab News: “The sharp fall in Saudi and GCC equities today (Sunday) was anticipated given last week's sharp but exaggerated fall in oil prices.”
However, he added: “We believe that oil prices will recover sooner rather than later, especially as 2015 is expected to be a better economic year for the United States as well as emerging markets. We don't believe that the oil market has not changed as dramatically as recent price action would imply.”
Sfakianakis said: “Saudi Arabia is one of the best insulated economies in the region to withstand any short and medium term shocks.”
The price of Brent crude fell about 10 percent to $70.15 per barrel since regional equity markets had last traded on Thursday and Sunday's opening was grim for long-only regional investors, Reuters said.
Petrochemicals giant Saudi Basic Industries Corporation (SABIC) fell by its daily 10-percent limit and the sector's index lost 9.0 percent.
The value of traded shares reached SR7.27 billion on Sunday.
According to Reuters, oil's plunge has become the main concern of Gulf investors in the last few weeks because they fear cheaper crude will force regional governments to cut spending and stifle the growth of local economies and corporate profits.
Other sectors at Tadawul also dropped. Banks shares were down 3.2 percent and retail stocks lost 3.5 percent.
"Concerns over forthcoming government spending have negatively affected share prices of non-petrochemical sectors," Reuters quoted Turki Fadaak, research and advisory manager at AlBilad Capital in Riyadh, as saying.
"(But) their revenues are not directly affected by declining oil prices. Accordingly, the drop in share prices constitutes attractive buying opportunities in these sectors," he said.
In other regional markets, Dubai's index fell 4.7 percent to a six-week closing low of 4,281 points, with most stocks in decline.
Abu Dhabi's stock index declined 2.6 percent to a five-month closing low of 4,675 points.
Qatar's bourse slid 4.3 percent as all stocks closed in the red.
Kuwait's index fell 3.4 percent to 6,753 points, its lowest level since April 2013. Oman's bourse tumbled 6.2 percent to a 14-month low.
Sunday's stock market fall was "a direct impact of the OPEC decision and the fear from the low oil price consequences" on Gulf economies, AFP quoted Ziad Chehab, vice-president of investment research at Kuwait's KAMCO investments, as saying.
"I think Gulf stock markets are expected to continue to bleed for some time to come," he said.