Gulf stocks battered by coronavirus and oil slump

Kuwaiti traders wearing protective masks to guard against the coronavirus, follow the market at the Boursa Kuwait stock exchange in Kuwait City. AFP A trader walks by beneath a stock display board at the Dubai Stock Exchange in the United Arab Emirates, on March 8, 2020. Saudi’s stock exchange fell 6.5 percent and other Gulf markets tumbled to multi-year lows at the start of trading after OPEC and its allies failed to clinch a deal over oil production cuts. (AFP)
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Updated 01 April 2020

Gulf stocks battered by coronavirus and oil slump

  • Perfect storm of pandemic and energy price war sends shockwaves across the region’s economic powerhouses

DUBAI: Stock markets in energy-rich Gulf states slumped to multi-year lows in the first quarter of this year over coronavirus shutdowns and crashing oil prices.

The five major bourses in the region, which pumps a fifth of the world’s crude supplies, plummeted in the first three months of the year, with Dubai’s market losing more than a third of its value.

The majority of the losses were sustained in March which saw the collapse of the OPEC+ production cut agreement and the implementation of shutdowns to counter the spread of coronavirus, bringing most businesses to a standstill.

The declines were also triggered by a price war between Saudi Arabia and Russia that sent oil prices crashing to 18-year lows, spooking investors into a sell-off.

The sharp decline led Standard & Poor’s ratings agency to cut its projections on average oil prices this year by half to $30 a barrel.

This means the six Gulf states — Bahrain, Oman, Kuwait, Qatar, Saudi Arabia and the UAE — will lose at least $100 billion in oil revenues this year.

Ratings company Moody’s estimated that Kuwait’s oil income would decline by 10 percent of gross domestic product (GDP), while the drop in other states will be between four and eight percent of GDP.

Capital Economics projected Middle East and North Africa growth this year to contract by 1.7 percent, the worst since early 1980s.

HIGHLIGHTS

The end of OPEC+ production cuts coupled with coronavirus-related shutdowns have rocked energy-rich Gulf states.

Dubai Financial Market led the slide in the first quarter, shedding a massive 36 percent since the start of the year, followed by its UAE partner Abu Dhabi Stock Exchange which dipped 26.4 percent.

In March, the two bourses posted their worst monthly performance in a decade, according to CNBC Arabiya channel.

The UAE’s largest real estate firm Emaar Properties dived a massive 45 percent in the first quarter.

The Saudi Tadawul market, the largest in the Arab world, plunged 22.5 percent to close the quarter at levels last seen in November 2016.

Saudi Aramco, the world’s biggest listed firm, gave up 15.3 percent since January to end 30.15 riyals ($8) a share, below its listing price of 32 riyals.

The energy giant was listed on the domestic bourse in December following the world’s largest initial public offering, which generated $29.4 billion.

Kuwait’s Premier Index dipped 24.1 percent and Qatar’s index dropped 21.3 percent. The tiny bourses of Bahrain and Oman dropped 16.1 percent and 13.4 percent 


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

Updated 11 min 20 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.