Gulf markets retreat as ‘global gloom’ weighs

A Saudi investor monitors stocks at the exchange market department at the Saudi Investment Bank in Riyadh (file). Saudi Arabia’s index, the largest regional market, fell 0.8% yesterday, cutting 2013 gains to 10.3%.

Reuters/Dubai

Regional bourses fell yesterday as renewed selling pressure on global shares sparked a profit-taking spree, extending losses since the US Federal Reserve said it would cut back a stimulus programme.

Qatar’s index slipped 0.6% to 9,178 points.

The US central bank’s plans and fears Chinese policy may be tightening sent the dollar sharply higher yesterday, while world shares extended last week’s dismal performance.

Saudi Arabia’s index, the largest regional market, fell 0.8%, cutting 2013 gains to 10.3%.

“I’m negative on Saudi for the summer months plus, technically, the market is not looking good - volumes are not supporting it,” said Farooq Waheed, senior portfolio manager at Riyad Capital.

Saudi companies will kick off earnings season from mid-July, the market’s only near-term catalyst. Waheed said second-quarter earnings expectations for large-caps are not very positive.

Indices for the heavyweight petrochemical and banking sectors fell 0.9 and 1.1% respectively.

Long-term investors in Gulf markets however are holding positions in selected stocks as dividend yields are attractive compared to other regions, analysts said.

In the UAE, Dubai’s index fell 1.9% to 2,256 points, its third consecutive substantial drop, but it is still up 39% year-to-date.

Sunday’s drop triggered a bearish right triangle formed by the highs and lows since early June, signalling the end of the rally that began in early April. The index is now testing minor support on the 38.2% retracement of the rally, but the triangle points lower, to near the 2,100-point area.

“We’re heading into a corrective phase, which could go on for months,” said Bruce Powers, technical analyst and corporate advisor at Orpheus Capital. “The more a rally is extended, the greater the chance of a sharp fall and this is happening now.”

Powers said the dip, at a time when global markets are under pressure, is not a surprise and the next support level is at 2,038 points, followed by 1,929. “Given the acceleration in the drop, there’s a pretty good chance we will hit the 1,950 area.”

In Abu Dhabi, the benchmark dropped 1.1%, trimming its 2013 gains to 34%.

Weaker trading volumes helped UAE markets outperform the drop on more liquid emerging market stocks in recent weeks.

The emerging market index slumped 14.1% between May 22-June 21, when Fed chairman Ben Bernanke fuelled expectations it would scale back its bond-buying programme.

In contrast, Abu Dhabi and Dubai gained 3.7 and 1.6% respectively in the same period.

Kuwait’s benchmark retreated 1.6%, while Oman’s bourse lost 0.9% and Bahrain’s measure declined 0.4% to 1,198 points.

Egypt’s index eased 0.03% to 4,523 points.