Dubai market loses 7 percent after oil price dip

Bahrain also declined, but it was the only market that lost below one per cent at 0.37 per cent.

Last week, Saudi Arabian entrepreneur Essam al-Zamel warned that oil prices in the Kingdom might not recover for five or ten years. Considerations about slowing progress on the earth’s second-largest financial system shook markets all over the world and drove the U.S. inventory market to its largest drop in nearly 4 years on Friday. With Brent crude at $45 a barrel, the government is running an annual budget deficit near $150 billion – but it has over $600 billion of foreign assets at the central bank and little debt. The changes in its office in the Middle East serve as a microcosm of the fluctuations in the exchanges in private investments between China and the region.

Stock markets in Saudi Arabia and Dubai closed around 7 percent lower on Sunday on the back of the further slide in oil prices in Friday’s trading session which saw oil prices fall below the $40 level for the first time since the financial crisis of 2009.

At the DFM, traders exchanged about 340 million shares, around 14 per cent more than the 12-month average. “There was no discrimination in the selling – it was across markets, across sectors, across names”, said Sebastien Henin, portfolio manager at The National Investor in Abu Dhabi.

The recent Gulf stocks selloff, however, has created buying opportunities, some analysts say.

The tumble within the Saudi inventory additionally comes after the Fitch scores company revised its outlook for the nation from “secure” to “unfavorable” in its overseas and native foreign money issuer default score.

While Saudi Arabia went through a similar scare seventeen years ago, the main difference today, is that the cost of maintaining the state as the main employer and supporting the extravagance its citizens are accustomed to, has increased significantly. Oil rebounded after 1998 – the price of crude advanced in 11 of the 16 calendar years since then – not least because the Saudis used their clout as the de facto leader of the Organisation of Petroleum Exporting Countries, or Opec. “Weak economic data from China and the US, and Fitch revising Saudi Arabia’s outlook to negative is not helping either”.

“Gradually as the dust settles we will start to see prices based more on fundamentals, but there needs to be some stability of both oil prices on the global equity scene before we get to that point”, he said.