JEDDAH/DUBAI: Petrochemicals stocks dragged Saudi Arabia’s index to a five-week low on Wednesday as most Gulf Arab benchmarks fell, with declining oil prices and a sharp drop in Asian markets spurring selling ahead of Ramadan.
Saudi Basic Industries Corp. (SABIC) fell 5.3 percent, taking its losses to 8.6 percent since Sunday. Rival Rabigh Refining and Petrochemical Co. slid 3 percent.
“SABIC has enjoyed a good runup over the past couple of months, tracking gains in oil,” said a Riyadh-based trader who did not wish to be named. “Saudi petrochemicals producers get cheap oil and so if oil prices go up it makes their rivals from other countries less competitive.”
The Tadawul All-Share Index (TASI) fell 2.4 percent to 5,623 points on its final trading day before Ramadan, leaving it down 3.8 percent this week, its largest weekly decline since mid-July.
Sector losses ranged from a 0.36 percent drop in Energy & Utilities to a staggering 7.63 percent loss in Insurance, followed by a 3.83 percent drop in Petrochemical Industries. Overall market breadth was also strongly negative, with only 5 advancers and 124 decliners, bringing the overall advance-decline ratio to 0.04, the Jeddah-based Financial Transaction House (FTH) said on Wednesday.
“Global investors are becoming more skeptical about an improvement in oil prices before the end of the year, and this will severely negatively affect TASI, as we saw Wednesday, where the market was pushed far below the lower Bollinger Band,” the FTH said in its daily market commentary.
“The market is volatile and has been pretty much following crude for the past few days,” said the trader. “There is no stock-specific news, but the market has rallied quite heavily this year and there is short-term uncertainty, so I don’t think people want to hold big positions through Ramadan.
“Trading tends to be flat during Ramadan and so it looks like people are cashing out now.” “People are still looking at Asian markets and they fell quite sharply, which affected sentiment in the Gulf,” said Talal Al-Loghani, vice-president for Gulf equity markets at Kuwait Finance and Investment Co.
“Asian markets are about the best performers in the world this year and if they continue to fall, I think (Gulf) investors will increasingly focus on more relevant factors to this region, such as oil prices.”
Property-related stocks were biggest losers in Dubai. Union Properties fell for the fourth trading day since its second-quarter earnings flagged up concerns over its debt position. The firm dropped 4.4 percent, wiping out early gains and taking its losses to 25.2 percent since its results were released late Thursday. Emaar Properties was another major casualty, sliding 3.6 percent.
“Real estate is about the most liquid sector and it had a decent runup that took prices above earnings expectations and so it was always the favorite to see the biggest selling pressure,” said Julian Bruce, EFG-Hermes director of institutional equity sales.
The Dubai index fell 1.5 percent to 1,789 points. Abu Dhabi’s benchmark closed lower for the third time this week as volumes slipped to a seven-session low. The index slipped 0.6 percent to 2,787 points. Trading has also slumped on other markets, with volumes on the Saudi index barely half its three-month moving average. “Historically, trading goes down during Ramadan and we’re already quite strapped for liquidity,” said Ayman El-Saheb, Darahem Financial Brokerage director of operations.
Qatar’s index ended lower for a fourth straight session, slipping to a three-week low as its largest 10 stocks all declined. The benchmark dropped 2 percent to 6,681 points.
Barwa Real Estate fell 4 percent and has lost 10.8 percent since Sunday when it had appointed a new chief executive and deputy.
Kuwait’s Zain slipped 1.4 percent after posting a 10-month closing high the previous day. The stock has surged 43 percent over the past six weeks on mounting expectations the telecoms operator will sell some or part of its African operations or major shareholders will sell a stake in the firm itself. The Kuwaiti index slipped 0.1 percent to 7,891 points, its third straight reverse.
The stock index in Oman rose 0.6 percent to 6,132 points and Bahrain’s index increased 0.4 percent to 1,508 points.
— With input from agencies
