Zawya Dow Jones/Dubai

Emirati investors follow the stock market developments at the Dubai Financial Market in Dubai. The benchmark DFM General Index closed 2% lower at 1444.29 yesterday, while Abu Dhabi’s main gauge lost 1.3% to 2577.76
Stocks in the Gulf region headed sharply lower yesterday, tracking a world-wide equity market rout, as concerns mount over the outlook for global economic growth.
“Markets are clearly in risk-off mode,” said Emad Mostaque, a Mena region strategist at Religare Capital Markets in London. “Government (US, Europe) action is imminent and in the aftermath we will see increasing flows into cash-rich countries who are still spending, such as those in the Middle East, as opposed to those where austerity is about to bite. The world is not ending, just readjusting.”
Dubai’s benchmark DFM General Index closed 2% lower at 1444.29, while Abu Dhabi’s main gauge lost 1.3% to 2577.76. Qatar’s QE Index slid 1.8% to 8070.69 and Oman’s MSM30 Index shed 1.8% to 5505.21. Saudi’s Tadawul Index, the region’s largest stock market, fell 0.81% to 6008.67.
The trigger for the latest regional equity market pullback was Wall Street’s hefty slide overnight as well as heavy losses racked on Asian and European bourses early yesterday. Investors world-wide remain edgy about the prospect of another recession in the US and debt contagion across the eurozone.
Analysts said while many companies in the Gulf region aren’t as connected to the global macroeconomic story as their European or the US counterparts, local stock market performance is still largely driven by international sentiment.
“GCC markets are taking it on the chin,” said Daniel Broby, chief investment officer with Silk Invest, a boutique asset management firm dealing with emerging markets. “People are really falling over themselves to apportion blame to either Europe debt crisis, the falling oil price, the slowing US economy or the US debt downgrade. It’s a building storm in an illiquid Ramadan market,” he added.
Emirates NBD, the region’s largest Gulf bank by assets, fell 2.3% to 3.90 dirhams in Dubai. Abu Dhabi’s Dana Gas lost 5.2% to 0.55 dirhams. Saudi heavyweight Saudi Basic Industries Corp fell 1.28% to 96.25 riyals in Riyadh.
Investors worried but see value in domestic names
Credit Suisse has said in feedback from regional institutional investors, no one sees a direct impact on Mena markets from the US debt downgrade, but all are concerned about a domino effect on other top-rated nations. All investors surveyed are also worried about global GDP growth slowdown and declining oil price. Many funds feel safer moving away from “petchems and globally-driven stocks/sectors into domestically driven names.” Very few see recent Mena sell-off as a good opportunity [risk aversion at recent highs] in general, but see value in domestic names, CS has said. For regional investors, the two favoured markets are Saudi Arabia and Qatar, the note said. “Markets are more sentiment driven at the moment and it’s not on panic mode yet.” Many feel that if it wasn’t for the seasonal effect of summer and Ramadan, the declines wouldn’t be as bad and more buyers would be stepping in.