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, a sign of the volatility to come as governments in the region push ahead with reforms.
The decline cut the combined market capitalization 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 percent 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 Saad 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 Malik, 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.”
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 United Arab Emirates 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 percent on Tuesday, a sign to some analysts that state funds are propping up shares. The gauge closed little changed on Wednesday, erasing declines of as much as 1.1 percent. A spokesman for the Public Investment Fund didn’t respond to requests for comment.
Oman’s market capitalization added $91 million this week through Tuesday.
Stocks indexes in the U.A.E., 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.
-Abu Dhabi’s ADX General Index fell 1.1 percent to the lowest level since December
-Qatar’s QE Index, already at a 2011 low, retreated 0.9 percent
-Oman’s MSM30 Index lost 0.9 percent; none of the gauge’s 30 members rose
-Saudi Arabia’s Tadawul All Share Index erased losses at the close, again
-Bahrain’s BB All Share Index added 1.1 percent, buoyed by gains in one company: Ahli United Bank
-Kuwait’s SE Price Index climbed 0.6 percent, ending a three-day losing streak