The index edged up 0.08 percent ending at 6,078 points as bargain hunters stepped in to pick up battered stocks.
“Until we find out how the downgrade affects Saudi financial market, there’s going to be a lot of trepidation in Saudi,” says a Riyadh-based fund manager.
Saudi Basic Induistries Corp. dropped 0.3 percent and Al-Rajhi Bank gained 1.1 percent
Most Gulf Arab markets ended lower on Sunday, rattled by a US ratings downgrade and European debt woes, even as their central bankers downplayed risks and voiced support for US debt instruments.
Standard & Poor’s cut the US long-term credit rating by a notch to AA-plus in an unprecedented blow to the world’s largest economy. It called the outlook “negative,” signalling another downgrade is possible in the next 12 to 18 months.
A steady open in Saudi Arabia, which starts two hours after the first Gulf markets begin trading, helped staunch the decline elsewhere on Gulf markets on Sunday.
But early damage was done with Dubai’s benchmark enduring its biggest drop since Jan. 30. Dubai closed at a 20-week low, slumping 3.7 percent to 1,484.
Emaar Properties ended down 5.3 percent, Arabtec sagged 6.3 percent and Dubai Financial Market closed off 5 percent.
Oman’s index ended at a two-year low, down 1.9 percent at 5,651 percent. Bahrain fell 0.33 percent to 1,277 percent while Abu Dhabi ended at a May 26 low, down 2.5 percent. Kuwait ended 1.6 percent lower at 5,968 points.
“The global story is looking increasingly less optimistic, and at the same time you have equity markets here that have been relatively less volatile for a considerable stretch,” says Akram Annous, Dubai-based MENA strategist at Al-Mal Capital.
“That’s probably going to start to change now, and I think the majority of the risk is in Saudi Arabia and Qatar’s markets because they are more leveraged to the (emerging market) growth story.”
Qatar’s benchmark closed at its lowest level since June 27, down 2.5 percent at 8,277 points. Saudi Arabia’s index ended up 0.08 percent at 6,078 points.
Investors were eyeing Monday’s opening of global markets with trepidation. Regional bond prices had begun to ease on Friday and a further sell-off is expected.
The spread on HSBC/Nasdaq Dubai’s Middle East bonds and sukuk index widened about 30 basis points between Aug 3 to 5.
“Shorter-dated local bonds and sukuk should hold up relatively well because of local demand,” said Nick Stadtmiller, fixed income analyst at Emirates NBD in Dubai.
“But longer-dated bonds will have a harder time, as international investors are key buyers of this paper.”
The US dollar may weaken and Treasury yields rise when Asian markets reopen on Monday, though any selling in response to the US downgrade is likely to be tempered by the escalating crisis in the euro zone.
