Dubai benchmark index in worst one-day fall in nine weeks

The Dubai Financial Market General Index on Tuesday fell the most in a single day of trading in more than nine weeks as the oil slump and the sell-off of Chinese equities continued to drag down stock markets in the Arabian Gulf.

Saudi Arabia’s benchmark Tadawul index fell as much as 3.9 per cent after Brent crude dropped to a new six-month low of US$48.25 a barrel.

The index eventually closed 2.85 per cent lower at 8,197.02. It has shed 10 per cent of its value since the start of this month.

In Dubai, the headline index fell 2.5 per cent at the end of trading to 3,827.59, its lowest close since mid-April.

Emirates NBD and Emaar Properties were among the worst hit stocks, losing 3.5 and 3 per cent respectively.

In Abu Dhabi, shares closed down 1.9 per cent at 4,539.85, the lowest level since late May.

“No matter how hard governments in the region have attempted to diversify their economies, they are still ultimately reliant on oil and government spending,” said Ahmed Waheed, a vice president of institutional trading at Menacorp.

Saudi Arabia’s decision last month to issue its first sovereign bond in eight years to cover a budget deficit because of declining oil prices has sparked fears of similar moves across the region.

“Investors believe that if Saudi Arabia is in trouble and has to tap the debt markets, countries like the UAE and Qatar are likely to be not far behind,” said Mr Waheed.

The prospect of lower economic growth across the Arabian Gulf, coupled with disappointing second-quarter corporate results, had severely weakened investor sentiment in the UAE, he said.

Dubai’s headline index has tumbled 7.6 per cent this month, while the Abu Dhabi Securities Market General Index has fallen 6 per cent over the same period.

The further decline of oil prices yesterday was exacerbated by a sell-off of Chinese equities, once again raising concerns over the health of the world’s second-largest economy.

The Shanghai Composite Index fell 6.2 per cent at the end of the trading day on Tuesday, its worst performance in three weeks, amid lower expectations of further government intervention to halt the slide in equities.

“The prospect of lower growth in China is bad news for everyone, given that it’s the world’s largest oil importer, and oil is the bread and butter for GCC economies” said Tariq Qaqish, the head of asset management at Al Mal Capital in Dubai.

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