Middle East stocks decline most in world as foreign traders flee

Stocks across the Middle East tumbled as foreign investors exited the region amid a global selloff.

Egypt’s EGX 30 Index led the slump with a 4.3 per cent decline as of 12.22pm in Cairo, taking its retreat this week to 14 per cent. The gauge was the worst performer among more than 90 gauges tracked globally by Bloomberg, followed by Dubai’s measure. The Bloomberg GCC 200 Index, comprising 200 of the biggest companies in the six-nation GCC, retreated 2.6 per cent to the lowest level since July 2012.

“Foreigners are dumping stocks in the region,” said Ahmed Shehada, the Dubai-based executive director for advisory and institutions at NBAD Securities. “Oil has been leading the free fall, China’s been adding to the selling pressure and we can’t dismiss the geopolitical tension in the region. These three ingredients are a bitter meal.”

Stocks worldwide declined on concern that turbulence in China’s markets will spread to the global economy just as the Federal Reserve is increasing borrowing costs. The equity rout adds more pressure on Middle Eastern stocks, which had already suffered losses amid the slump in oil prices and growing tension between Iran and its Arab neighbors.

The GCC is home to about 30 percent of the world’s proven oil reserves, and its governments rely on income from energy sales to fund spending. While Brent crude rose 0.7 per cent on Thursday to $30.51 a barrel, it remains near the lowest level since April 2004.

The BGCC 200’s 14-day relative strength index dropped to 17. A level below 30 signals to some investors that the gauge is oversold. Shehada expects attractive valuations to help stem declines “soon.”

About 70 per cent of stocks on the BGCC 200 fell. The gauge has lost 12 per cent so far this month and is heading for the worst January since the index began about 10 years ago.

Saudi Basic Industries Corp.’s 2.5 per cent drop led the decline on Thursday. The chemical manufacturer was also one of the biggest contributors to the retreat in Saudi Arabia’s Tadawul All Share Index, which slid 3.4 per cent to the lowest level since August 2011.

The Tadawul has lost 16 per cent in 2016 and is the GCC’s worst-performing measure.

Qatar’s QE Index retreated for a sixth day, losing 2.3 per cent. Dubai’s DFM General Index, which dropped every day this year except one, declined 3.6 per cent. Emaar Properties, the developer of the Burj Khalifa, the world’s tallest tower, sank as much as 6.6 per cent before trimming its slump to 5.8 per cent to the weakest close in almost three years.

Abu Dhabi’s ADX General Index decreased 1.6 per cent, and Kuwait’s gauge fell 1.6 per cent. Oman’s MSM 30 Index traded 1.7 per cent lower. Bahraini stocks slipped 0.1 per cent.

Israel’s TA-25 Index slumped 2.3 per cent, the most in a month, led by Perrigo and Teva Pharmaceutical Industries, following losses in their US-traded shares. 

The country’s natural gas stocks were among the worst performers on the gauge. Delek Group, Israel’s largest-traded energy company, sank 5.2 per cent to the weakest level since September 2012. Its units Avner Oil Exploration and Delek Drilling declined 4.9 per cent and 5.4 per cent, respectively. The companies are partners in the Tamar and Leviathan gas fields.

“Prices in the Leviathan and Tamar contracts are linked to Brent crude, which keeps dropping,” said Israel Brokerage & Investments analyst Liran Lublin, who has a neutral rating on Delek Group’s stock. “Investors are also worried about Noble’s ability to fund development in Leviathan.”


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