Middle East stock markets plunged to multi-year lows again yesterday, with the Saudi market losing 5% of its value, in response to a fresh drop in oil prices and global equities.
With valuations and dividend yields now looking attractive by global standards, major Middle Eastern markets had rebounded on Tuesday. Yesterday’s losses erased those gains and underlined the fragility of investor sentiment, amid uncertainty over how Gulf oil exporting economies can cope with an era of cheap oil.
Riyadh’s index sank 5.0% to 5,460 points, the lowest close since March 2011. It has lost 21% so far this year. Petrochemical blue chip Saudi Basic Industries slumped 6.0%.
Al Tayyar, a traditional play on rising consumer spending in Saudi Arabia, tumbled 9.0%. The tourism and travel group posted a 6.9% fall in fourth-quarter profit to 215mn riyals ($57.3mn); analysts at Aljazira Capital and Osool & Bakheet Investment Co had expected 286.3mn riyals and 296.4mn riyals.
Khodari, a construction firm, slumped 9.7% after it swung to a fourth-quarter loss as margins and revenue fell and financial charges increased.
All major banks fell more than 2.0%. Arab National Bank plunged 8.7% after posting a quarterly net profit of 594.4mn riyals, a 5.5% fall; analysts polled by Reuters had forecast an average 691.2mn riyals.
Standard & Poor’s said yesterday it foresaw increasingly difficult operating conditions for Saudi banks over the next two years, because of pressure on government spending and the impact on the domestic economy.  “We expect credit growth will contract to mid-single digits, given the strong correlation between oil prices, government spending, and credit growth,” said S&P analyst Suha Urgan.
In Egypt, the main index slumped 5.3% in response to Asian stock markets’ decline. Orascom Telecom fell 8.6%, wiping out all of Tuesday’s 5.5% gain, and was the most traded stock.
Foreign investors, who have been exiting positions in Cairo stocks for more than a week, were again net sellers yesterday, bourse data showed. Commercial International Bank and Global Telecom, two favourites of foreign funds, each tumbled 8.7%.
The Dubai and Abu Dhabi bourses both tumbled to 28-month lows. Dubai plunged 4.6%; the two most traded stocks were builders Arabtec and Drake & Scull, declining 7.7 and 7.8% respectively. Drake posted a record low close.
Abu Dhabi’s bourse slumped 3.1%, taking its 2016 losses to 12.5%. Small and mid-cap stocks were battered as local investors dumped shares indiscriminately. Dana Gas, the most traded stock, plummeted 9.5%.
“The stock markets are fickle and vulnerable to swings in oil prices,” said an Abu Dhabi trader. “Tuesday’s rebound lost its bounce because we are back to the same macroeconomic worries which have plagued equity markets from the start of the year.”
Elsewhere in the Gulf, Oman’s index declined 1.8% to 4,891 points; Kuwait’s index traded down 2.0% to 4,985 points, while Bahrain’s index slid 0.6% to 1,168 points.