Tadawul index sinks 4.5% to lowest since December 2011

Updated 07 January 2016

Tadawul index sinks 4.5% to lowest since December 2011

JEDDAH: Gulf stock markets fell sharply on Thursday, with Saudi Arabia plunging more than 4 percent and other major markets losing at least 3 percent, because of a fresh slide of oil prices and worries about the health of the regional and global economies.
Brent oil sank more than 4 percent to below $33 a barrel for the first time since April 2004.
Saudi Arabia’s 2016 state budget, released last week, projected a $87 billion deficit — assuming oil averaging about $40.
The Saudi Tadawul All-Share Index sank 4.5 percent, its biggest daily drop since August, to close at 6,225 points, its lowest finish since December 2011. It closed within just 35 points of the day’s low.
Only three out of 166 traded Saudi stocks rose.
Second-tier banks were hit particularly hard on concern about an economic slowdown; Al-Jazira Bank dropped 5.8 percent.
United Electronics, a popular play on Saudi consumer demand, plunged 9.4 percent.
Heavily weighted petrochemical stocks sagged as cheap oil will erode producers’ margins, and because of worries about demand in China.
Also, the Saudi state budget sought to save money by hiking natural gas feedstock prices for the industry.
Blue chip Saudi Basic Industries Corp. lost 3.2 percent and the sector’s index sank 3.3 percent.
“The multi-year low oil prices, weak demand in key markets and the recent change in feedstock prices are expected to significantly impact the sector’s profitability in 2016,” analysts at NCB Capital said in a note.
They estimated the sector’s net income would fall 13.6 percent this year, with gross profit margins hit by between 2 and 8 percentage points. They also said the profit fall could be more severe if China’s economy weakened or oil prices averaged less than $52 a barrel this year.
Advanced Petrochemical rose 1.2 percent, however, after NCB Capital upgraded it to “overweight” from “neutral,” citing a favorable feedstock mix, its operating efficiency and an attractive dividend yield.
Analysts at Al Jazira Capital said Advanced Petrochemical, which uses liquid gas feedstock, would outperform producers using ethane as feedstock; the domestic price of ethane rose to $1.75 per million British thermal units from 75 US cents in the state budget.
The seasonally adjusted Emirates NBD Saudi Arabia Purchasing Managers’ Index, published on Thursday, showed growth in the non-oil private sector falling to its slowest pace in December since the survey was launched in August 2009.
The slowdown appears to have been caused by a cut-back in Saudi state spending late last year. The 2016 budget contained more cuts, and additional austerity steps could be taken if oil continues falling.
“We suspect that this is probably just a sign of things to come,” London-based Capital Economics said in a report on the Saudi PMI, predicting that a fiscal squeeze would reduce growth further this year.
Economies and governments in the UAE and Qatar, which have stronger state finances, look better placed to cope with an era of low oil prices. But their markets were caught up in the sell-off too, as weakness in Saudi Arabia could have an impact throughout the region.
The Emirates NBD UAE Purchasing Managers’ Index for December, published on Thursday, showed business activity growth in the UAE slowing to a 40-month low.
Dubai’s index tumbled 3.4 percent in an almost indiscriminate sell-off; blue chip Emaar Properties sank 5.4 percent.
Telecommunications firm du was bought as a defensive stock, however, rising 0.6 percent.
Abu Dhabi dropped 3.2 percent in a broad sell-off.
Qatar lost 3.0 percent; drilling rig provider Gulf International Services, the most heavily traded stock, tumbled 6.3 percent.
Egypt’s market was closed on Thursday for a holiday.

Bank jobs go as HSBC and Emirates NBD reduce costs

Updated 15 November 2019

Bank jobs go as HSBC and Emirates NBD reduce costs

  • Others have also reduced headcount amid economic downturn and property market weakness

DUBAI: HSBC Holdings has laid off about 40 bankers in the UAE and Emirates NBD is cutting around 100 jobs, as banks in the Arab world’s second-biggest economy reduce costs.

The cuts come amid weak economic growth, especially in Dubai, which is suffering from a property downturn.

HSBC’s redundancies came after the London-based bank reported a sharp fall in earnings and warned of a costly restructuring, as interim CEO Noel Quinn seeks to tackle its problems head-on.

HSBC has about 3,000 staff in the UAE, part of a nearly 10,000-strong workforce in the Middle East, North Africa and Turkey.

The cuts at Dubai’s largest lender Emirates NBD came in consumer sales and liabilities, one source said, while a second played down the significance of the move.

HSBC and Emirates NBD declined to comment.

“The cuts are part of cost cutting and rationalizing to drive efficiencies in a challenging market,” the second source said.

Other banks have also reduced staff this year. UAE central bank data shows local banks laid off 446 people in the 12 months until the end of September. Foreign banks added staff in the same period.

Staff at local banks account for over 80 percent of the 35,518 banking employees in the country.

The merger between Abu Dhabi Commercial Bank, Union Commercial Bank and Al Hilal Bank saw hundreds of redundancies.

Commercial Bank International (CBI) said it would offer voluntary retirement to employees in September, which sources said saw over 100 departures. Standard Chartered, too, cut over 100 jobs in the UAE in September.

Rating agency Fitch warned in September a weakening property market would put more pressure on the UAE’s banking sector.