Black Monday: Oil price slump, virus spark market meltdown

The closing numbers are displayed on the floor of the New York Stock Exchange. (Reuters)
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Updated 10 March 2020

Black Monday: Oil price slump, virus spark market meltdown

  • Global stocks in turmoil amid wave of sell-offs
  • $400 billion wiped off regional markets in two days

DUBAI: Financial markets around the world tumbled on Monday as investors took fright at the growing economic risks from the global coronavirus outbreak and the prospect of a prolonged decline in oil prices.

On Wall Street, the world’s biggest financial market, leading shares fell by 7 percent on opening, wiping billions of dollars off investments, after the big markets in Asia and Europe had all experienced sharp declines. New York recovered slightly in later trading, and after a rollercoaster day the Dow Jones Industrial Average closed nearly 8 percent down.

The Middle East was no exception to the wave of selling, with the Tadawul in Riyadh closing 7.75 percent down on the day. UAE markets fell by similar amounts. Regional markets have lost about $400 billion in value over the past two days.

“We are now in a period of true turmoil. Fear is now all-pervasive,” oil historian Daniel Yergin said on US TV.

Global investors, already spooked by the economic fallout from the coronavirus outbreak, were panicked by the prospect of a price war in energy markets after Saudi Aramco, the world’s biggest oil company, offered customers big discounts on crude supplies from next month.

Oil prices fell sharply in global trading. Brent crude, the benchmark for Middle East oil, plunged by nearly 30 percent — its biggest fall on opening in nearly three decades. It recovered significantly in later trading, to stand at $37.27 per barrel, down 17.5 percent.

Independent oil company shares were savaged. BP fell 19 percent, Shell 15 percent and ExxonMobil 8 percent. Tadawul-quoted shares in Saudi Aramco, the world’s largest oil company, were 5.5 percent down at close.

The damage was even worse for oil companies with significant exposure to US shale, potentially the biggest losers from a price war. Occidental Petroleum, a big investor in Texas shale, fell 35 percent at halftime trading in New York.

Nevertheless, investment experts said the carnage in the oil sector would not necessarily lead to a financial crisis. 

“The prospect of heightened instability in energy markets adds to the pessimism created by coronavirus, but the fall in oil prices will not on its own lead to a financial crisis like 2009,” Tarek Fadlallah, chief executive of Nomura Asset Management in Dubai, told Arab News.

Mazen Al-Sudairi, head of research at Al-Rajhi Capital in Riyadh, said the oil sector was “one of the major casualties” of the market volatility prompted by the coronavirus outbreak, and that a “cascading effect” could be expected on the local economy.

However, he also saw potential for optimism. “Upside surprise could be a seasonal fade-out of virus implications, renewed Opec+ agreement, an increase in oil prices as supply reduces, and sharp de-escalation of Chinese situation.”

 


Bayut and Dubizzle merge to create a Dubai-based unicorn company

Updated 4 min 36 sec ago

Bayut and Dubizzle merge to create a Dubai-based unicorn company

  • The two owner companies will also run a $150 million investment round
  • EMGP will continue operating both Bayut and Dubizzle in the UAE

DUBAI: The owners of UAE technology firms Bayut and Dubizzle have announced a merger which will form a $1 billion Dubai-based unicorn company, state news agency WAM reported on Tuesday.
Emerging Markets Property Group, EMPG, and OLX Group will also run a $150 million investment round as part of the agreement to merge their MENA and South Asia operations.
Unicorn companies are privately held startups valued at over $1 billion.
The merger makes OLX, EMGS’s largest single holder with 39 percent of shares. EMGP will continue operating both Bayut and Dubizzle in the UAE, and the merger will bring OLX entities in Egypt, Lebanon, Pakistan and several GCC countries into the company’s reach.
“This merger of EMPG and OLX will allow us to better serve our customers, given that both operate brands with a strong following and will allow us to leverage existing tech and data to paint a more accurate picture of the state of affairs in the real estate industry across the region. At the same time, we will be making significant technology investments to provide more value to all users of property, automotive and other segments of the Dubizzle and OLX platform,” Head of EMGP MENA Haider Ali Khan said.
The cumulative value of properties sold in the UAE, Egypt, Lebanon and Pakistan through the websites is estimated at $8.984 billion, offering a possible commission pool of above $1.9 billion for real estate agents.
Meanwhile, Ali Maabereh, head of mergers and acquisition (M&A) at KMPG in Saudi Arabia said M&A activity will increase in GCC countries amid the coronavirus pandemic as SMEs and several large corporates will look for capital injections to satisfy working capital needs.
“The current pandemic is creating a lot of uncertainties and contradictions in what to expect after the dust settles. The expected key impacts on companies are shortages of liquidity and working capital requirements. Though companies might be running a healthy P&L, there will be significant pressure on working capital requirements,” he said.