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 


Lee’s death sparks hope for Samsung shake-up, dividends

Updated 26 October 2020

Lee’s death sparks hope for Samsung shake-up, dividends

  • Shares in the company and affiliates rise; around $9bn in tax estimated for stockholdings alone

SEOUL: Shares in Samsung Electronics Co. Ltd. and affiliates rose on Monday after the death a day earlier of Chairman Lee Kun-hee sparked hopes for stake sales, higher dividends and long-awaited restructuring, analysts said.

Investors are betting that the imperatives of maintaining Lee family control and paying inheritance tax — estimated at about 10 trillion won ($8.9 billion) for listed stockholdings alone — will be the catalyst for change, although analysts are divided on what form that change will take.

Shares in Samsung C&T and Samsung Life Insurance closed up 13.5 percent at a two-month high and 3.8 percent, respectively, while shares in Samsung SDS also rose. Samsung Electronics — the jewel in the group’s crown — finished 0.3 percent higher.

Son and heir apparent Jay Y. Lee has a 17.3 percent stake in Samsung C&T, the de facto holding firm, while the late Lee was the top shareholder of Samsung Life with 20.76 percent stake.

“The inheritance tax is outrageous, so family members might have no choice but to sell stakes in some non-core firms” such as Samsung Life, said NH Investment Securities analyst Kim Dong-yang.

“It may be likely for Samsung C&T to consider increasing dividends for the family to cover such a high inheritance tax,” KB Securities analyst Jeong Dong-ik said. Lee, 78, died on Sunday, six years after he was hospitalized due to heart attack in 2014. Since then, Samsung carried out a flurry of stake sales and restructuring to streamline the sprawling conglomerate and cement the junior Lee’s control.

Investors have long anticipated a further shake-up in the event of Lee’s death, hoping for gains from restructuring to strengthen de facto holding company Samsung C&T’s control of Samsung Electronics, such as Samsung C&T buying an affiliate’s stake in the tech giant.

“At this point, it is difficult to expect when Samsung Group will kick off with a restructuring process as Jay Y. Lee is still facing trials, making it difficult for the group’s management to begin organizational changes,” Jeong said.

Lee is in two trials for suspected accounting fraud and stock price manipulation, as well as for his role in a bribery scandal that triggered the impeachment of former South Korean President Park Geun-hye. The second trial resumed hearings on Monday.

Lee did not attend the trial on Monday, as Samsung executives joined other business and political leaders for the second day of funeral services for his father.