Gulf stocks plummet as oil prices plunge

Dubai’s stock market has closed almost seven percent lower in its first day of trading for the week after a further slide in oil prices. The Dow Jones Industrial Average fell into a correction on Friday, fueling the biggest losses since 2011 for other gauges. Emerging market stocks suffered as it played into concerns that the Fed is preparing to hike rates and low oil prices.

Egypt’s main index, the EGX30, dropped 5.4 percent while Abu Dhabi’s index dropped 5 percent.

The collapse of brent, the global oil benchmark, from about $107 per barrel in June past year to around £45 per barrel today had eaten into Saudi Arabia’s income.

For the Gulf nations, which largely depend on energy exports to finance their expansionary spending plans at home, the weak outlook for oil further aggravated a recent sell-down of risk in the region.

Saudi Arabia’s Tadawul is now down 24 per cent since hitting its 2015 peak in April, marking its second bear market in less than a year.

The tumble in the Saudi stock also comes after the Fitch ratings agency revised its outlook for the country from “stable” to “negative” in its foreign and local currency issuer default rating.

Given Saudi Arabia’s stature as “a bellwether for the region, we’ll probably see more declines”, following Tadawul’s slump into a bear market, said Dubai-based Tariq Qaqish, who oversees US$150 million as the head of asset management at Al Mal Capital PSC. Saudi Arabia’s revenues are nearly entirely dependent on the sale of oil. Emaar Properties also tumbled 5.64 per cent, while Dubai Islamic Bank also fell more than 3 per cent.