Reuters/Dubai
Saudi Arabia’s index made its largest drop in two years yesterday after authorities detained a Shia cleric, raising fears of sectarian strife, while talk of military activity exacerbated declines.
The Samba Financial Group, Saudi Arabia’s second biggest lender by market value, lost 8.6% yesterday
Shares tumbled and Brent crude rose more than a dollar in response to a report in an Egyptian newspaper that Saudi Arabia had sent tanks to Bahrain, but a Saudi official said there was no truth in the report.
“Everyone is getting out ... You see what’s happening in Muscat and Bahrain? People are scared this will happen in Saudi as well,” said a Riyadh-based analyst who asked not to be identified.
“It’s a surprising fall, but it has nothing to do with the economy of Saudi or business here. It’s all about the unrest and concerns in the region. It’s all politics.”
Middle East markets have slid in recent weeks as uprisings unseated veteran rulers in Egypt and Tunisia. Declines steepened as unrest reached the oil-producing Gulf Arab states, with deadly protests erupting in Bahrain and Oman.
The Saudi index fell 6.8% in its biggest drop since November 2008 to its lowest close since July 13, 2009.
Saudi Basic Industries Corp (Sabic), the Arab world’s largest listed company, fell 7.8% and Samba Financial Group lost 8.6%.
The index had risen in early trade, a day after The General Organisation for Social Insurance (GOSI), a quasi-state pension fund, bought petrochemical stocks, helping to stem losses.
Shares then tumbled following a Reuters report that Saudi authorities had detained a Shia cleric in the oil-producing Eastern Province after he called for a constitutional monarchy.
“Reports of some arrest of a cleric sparked the drop. There is now a big fear of contagion in Saudi,” said Haissam Arabi, chief executive and fund manager at Gulfmena Alternative Investments. “Things are not completely clear as stocks continue falling. There’s no clear answer at this point.”
“There are several rumours out there and it looks like investors of all class and type are shunning the markets,” said Nadi Bargouti, head of asset management at Shuaa Capital. “No single person, no single portfolio can move the markets to this extent. This is a complete shock.”
Margin calls and stop losses created a downward spiral and exacerbated declines, said Matthew Wakeman, EFG-Hermes managing director for cash and equity-linked trading.
The Dubai index halted declines, but gave back most of their early gains as Saudi stocks fell.
“In the long-term, Qatar’s market will recover, but in the short term, things are wobbly and if the bargain hunting is over-done, there will be fresh downside and the political situation is so uncertain,” said Robert Pramberger, acting head of asset management at Doha’s The First Investor.
Dubai rose 1%, edging up from Monday’s six-year low.
Kuwait’s Zain fell 1.5%. Abu Dhabi-listed Etisalat’s $12bn takeover of its Kuwaiti telecom rival has failed, a Zain source said, after the deal’s architect walked away. Etisalat fell 0.5%.
Abu Dhabi’s benchmark fell 0.6% to 2,574 points.
Kuwait’s measure fell 2.5% to 6,321 points.
Oman’s index climbed 4.1% to 6,401 points. Bahrain’s measure dropped 0.5% to 1,424 points.
