Gulf markets seen falling amid global decline

Analysts expect a grim November opening for Gulf Arab bourses, with October's early optimism fading fast as stock markets the world over tumble on increasingly pessimistic expectations for the global economy.

Saudi Arabia's benchmark index fell 2.7 per cent on Saturday in its largest one-day decline since mid-June in what could be an ominous precedent for the rest of the region.

"We are worried about the market today and believe it will follow what happened on US markets on Friday and Saudi Arabia yesterday, with a lot of panic selling today," says Adel Nasr, United Securities brokerage manager in Muscat.

He says the Oman index could fall between 1.5 and 2 per cent.

Saudi's slump follows similar declines on Wall Street the previous day, with the Dow suffering its largest single-session loss for nearly four months as investors dumped riskier assets such as equities and commodities for save havens such as the dollar.

A key gauge of Wall Street angst - the CBOE Volatility Index - jumped almost 24 per cent in its biggest one-day spike for a year.

"Overall, we think we will follow global sentiment, mainly because most of the trading in our markets is still from retail investors and this money tends to come in quickly and leave quickly too," says United's Nasr.

"There isn't a major contribution from institutions to help the market stabilise."

UAE telecoms operator du reported a surge in third-quarter profit early Sunday, while Dubai-listed Shuaa Capital reported a narrower quarterly loss.

Dubai Investments' third-quarter profit declined, falling 56 per cent from the year-earlier period.

United's Nasr says it is too early to gauge the severity or duration of a possible correction in Gulf equities, with investors likely to take their cue from global markets when they resume trading tomorrow.

"The banking sector is likely to be the most affected because the main concerns are still around banks and it was US financial stocks that were hardest hit on Friday," says Nasr.

"People are worried banks will take extra provisions in Q4."

A strengthening US currency makes most Gulf shares more expensive for investors from Europe and Asia thanks to the respective dollar pegs and is also helping to send oil prices tumbling.

Crude fell more than 3 per cent to below $77 a barrel on Friday, spooking investors in Saudi Arabia – the world's top oil exporter – the following day.

Saudi Basic Industries Corp (Sabic) was the prime loser on the Saudi bourse, dropping 3.7 per cent, while in Dubai, DP World lost 6.6 per cent on Thursday in its biggest reverse since early July.

Both these shares are seen as proxies for the world economy and had been resurgent as investors bet a recovery in world trade would boost the petrochemical and container industries, but with sentiment turning negative, they have been among the biggest victims regionally.

Recent market statistics make for grim reading. The Abu Dhabi and Saudi indexes suffered their largest weekly declines since June last week - and that was before the latter's sharp drop yesterday - while Dubai's weekly loss was its biggest for more than three months.

Kuwait's index fell 6 per cent in October, with regional bourses so far failing to mount the sustained fourth quarter rally that many analysts had predicted.