Saudi Arabia’s anti-corruption purge and deepening feud with Iran have spurred a selloff across Gulf stock markets to the tune of almost $7 billion (Dh25.7 billion), a sign of the volatility to come as governments in the region push ahead with reforms.
The decline cut the combined market capitalisation of bourses in the six-nation Gulf Cooperation Council to $910.7 billion, the lowest level in a year, according to data compiled by Bloomberg. Most major stock indexes in the region retreated on Wednesday, led by a 1.9 per cent drop in Dubai’s DFM General Index, the steepest in a year.
The Saudi crackdown, which included the arrest of a string of princes and billionaires on Saturday, has spread worries among investors over who might be next. Meanwhile, the surprise flight to Riyadh and subsequent resignation of Lebanese Prime Minister Sa’ad Hariri, who cited Iran and Hezbollah as one of the reasons why he’s stepping down, has raised concern that proxy conflicts between regional superpowers will worsen.
It’s “a reminder that the neutral space available to countries in the region, caught between rival projections of power from Iran and Saudi, is shrinking,” Hasnain Malek, the global head of equity research at Exotix Capital in Dubai, wrote in a note to clients. “Apart from Lebanon, this negatively affects Kuwait, Oman, Qatar and Pakistan.”
Outflows
The biggest decliner among GCC markets this week through Tuesday is that of Kuwait, which has lost $3.37 billion, followed by bourses in the UAE and Qatar, which have each dropped by about $2.6 billion.
Saudi Arabian stocks gained $1.96 billion. The kingdom’s index reversed losses in the two days through Monday, and curbed declines of as much as 3.1 per cent on Tuesday, a sign to some analysts that state funds are propping up shares. Oman’s market also climbed, adding $91 million.
Stocks indexes in the UAE, Qatar, Oman and Saudi Arabia fell on Wednesday. The DFM’s drop extends the gauge’s losing streak to six days, the longest since May 2016. Twenty-five companies out of a total 36 on the index fell, the most in 21 months.
