JEDDAH, 23 January 2008 — Stock market turmoil swept around the world again yesterday, with the Gulf and Asian shares pummeled by fears of a US recession before hopes of international action helped Europe put up resistance.
Oil, gold and other key commodities were also hit by the spreading worries that troubles in the United States could drag down the global economy. Asian equities slumped earlier, with Japanese share prices hitting a 28-month low and Hong Kong closing down almost nine percent. In India, trading was suspended yesterday when market crashed to a low of 15,532 points from a high of 21,000 in the beginning of the year.
However, the US Federal Reserve’s unprecedented three quarters of a point interest rate cut repelled the otherwise southward movement of both the European and US stocks.
Saudi Arabia’s stock market, the largest in the Arab world, posted its biggest drop on record as Saudi stocks retreated in response to a global equity rout and concerns over future earnings of the country’s largest firm.
The index dropped 9.67 percent to 9,338.54 points, its sharpest one-day slide on record, surpassing the 9.36 percent decline on July 15, 2006 during a stock market crash.
Saudi Basic Industries Corp. (SABIC), the world’s largest chemicals firm by market value, led the sell-off, dropping 9.93 percent, its sharpest drop since July 2006.
The stock has fallen 24.7 percent since its closing price on Jan. 19, when it missed fourth-quarter earnings forecasts and said the US mortgage crisis had hurt demand for chemicals.
“SABIC’s announcement that its fourth-quarter profit fell on ... lower demand for petrochemicals triggered concerns about petrochemical prices and a global recession,” said Abdullah Al-Rashoud, chief executive at KSB Capital Group.
The United Arab Emirates stock markets also tumbled yesterday as investors responded to a global equity rout, driving Dubai’s biggest one-day loss in more than 22 months and Abu Dhabi’s sharpest decline on record.
The Dubai benchmark slid 6.21 percent to 5,210.58 points, its sharpest one-day fall since March 14, 2006. Abu Dhabi’s index dropped 6.83 percent to 4,302.59 points, the biggest single-day slide on record.
Kuwait’s benchmark declined 1.6 percent to 13,117.10 points and Bahrain’s index shed 1.01 percent to 2,793.40 points.
Oman’s main index plummeted more than 8 percent, posting its biggest decline on record, and hitting a three-week low. The benchmark, the best performer in the Gulf region, plunged 8.33 percent to 8,916.92 points, its lowest level since Dec. 31, last year.
Qatar’s main index tumbled more than 7 percent, making its sharpest one-day decline on record and hitting a three-week low. The benchmark fell 7.76 percent to 9,151.93 points, its lowest since Dec. 5, 2007.
Egypt’s benchmark index dropped below 9,500 points for the first time in more than two months, extending drops triggered by a global equity sell-off. The index shed 5.14 percent to 9,452.33 points.
“Oman is not linked directly to the international markets, regional sentiment is leading to profit-taking. But we should see some stock-specific recovery,” said Sankar Kailasam, head of research at Muscat-based Gulf Investment Services.
“It’s a global issue and Egypt is one of the more liquid markets in the region so you have some foreign selling,” added Angus Blair, head of research at investment bank Beltone Financial. “There is good internal value in some stocks that we are ready to recommend when the market stabilizes.”
“There is panic selling by foreign investors because of the sharp decline in global markets,” said Alaa El Din Moustafa, chief dealer in Dubai at investment bank EFG-Hermes.
Toward the close, the European markets were mostly firmer again, with London’s FTSE 100 index up 2.42 percent, the Paris CAC 40 up 3.06 percent and Frankfurt’s DAX up 0.62 percent. Similarly, the Dow Jones came back steadily after its opening plunge, to show a loss of just 0.56 percent at 1615 GMT.
Also, oil fell to a six-week low, dragged lower by a stock market plunge amid fears a slowdown in the United States could have a much wider impact than previously thought. US crude fell to a low of $86.11 a barrel, its weakest since Dec. 6 and by 1243 GMT was trading at $87.40. London Brent crude fell $1.33 to $86.18 a barrel.
Gold slipped to a three-week low in choppy trade as unfavorable currency fundamentals, falling oil and struggling stock markets prompted investors to continue taking profits from last week’s record high.
Spot gold fell as low as $849.50 an ounce before trimming losses to $860.70/871.40 by 1223 GMT, still down from $867.10/867.80 in late European trade on Monday.
The dollar fell sharply against the euro after the Federal Reserve unexpectedly cut its benchmark overnight lending rate by 75 basis points.
The euro traded up 0.8 percent at $1.4560 compared with $1.4495 before the Fed’s unscheduled announcement. Against the yen, the dollar was up 0.6 percent at 106.65 yen, versus 106.29 yen.
