Test missile near Syria sparks sell-off in Gulf

Reuters/Dubai

Regional shares fell yesterday after Israel carried out a joint missile test with the US, rattling investors already worried that a possible military strike on Syria could trigger wider regional conflict.

Russia raised the alarm after detecting the launch of two ballistic “objects” in the Mediterranean Sea.

There were no reports of missile strikes on Syria but investors were on edge because Washington is preparing for a possible military action over what it says was a chemical weapons attack by government forces in their conflict with rebels trying to overthrow President Bashar al-Assad.

Obama has asked for support from Congress for a strike - which is not expected to take place before mid-September at the earliest.

Dubai’s bourse was the hardest hit, plunging 3.7% to hit a seven-week low but is still up 53.4% year-to-date.

The retail-dominated market has suffered the most from political tensions in the region, especially because of a sharp early-year rally.

Regional markets underperformed MSCI’s emerging market index, which slipped 0.2%, due to their proximity to Syria.

“Regional markets started the day positive with a good momentum and activity but the reports of missile launch took them south,” said Ahmed Shehada, head of trading at QNB Financial Services. “We saw many orders called off and halted.”

Abu Dhabi’s benchmark dropped 1.8%.

Saudi Arabia’s bourse snapped a four-session rally and lost 1.3%. Regional markets staged a recovery late last week but analysts say investors were too quick to jump back into markets like Saudi Arabia and Dubai, while Syria’s fate is still unclear.

“As long as there is uncertainty on possible military action in Syria, stock markets that have gone up more than most, are vulnerable to short-term profit-taking,” said an Abu Dhabi based analyst who asked not to be identified due to company policy. “Markets have been treating a military action too casually and this pull-back was expected. It’s difficult for people to expect the US to not do anything,” he added.

Elsewhere, Kuwait’s bourse fell 1.7%, down for an eighth straight session and slumping to a four-month low. “There’s a serious fear from investors about participating in the market,” said Fouad Darwish, head of brokerage at Global Investment House. “The delay on the Syria strike is causing havoc on the market.”

Darwish said clarity on the situation would be conducive for investor sentiment.

Kuwait’s new listing of Warba Bank was overshadowed by geo-political tensions. Shares in the Islamic lender rose 8.3%. It trades 4mn shares out of a market total of 242mn.

In Cairo, the measure declined 0.9% to extend 2013 losses to 4.9%.

Elsewhere, Oman’s index slipped 0.5% to 6,695 points, while Bahrain’s index slipped 0.4% to 1,184 points.