Tel Aviv/Dubai/Cairo: Disappointing company earnings, falling oil prices and a wave of terrorism culminating in Friday’s attacks in Paris unsettled investors leading to losses in almost every Middle Eastern market.
Dubai’s DFM General Index dropped 3.7%, the most in almost three months, after Drake & Scull International PJSC became the latest United Arab Emirates construction company to report losses. Egypt’s EGX30 Index tumbled 4.2% at 12:26 pm in Cairo to the lowest since December 2013 and Saudi Arabia’s Tadawul All Share Index sank the most in almost three weeks.
Drake & Scull joined larger rival Arabtec Holding Co. in reporting losses because of “challenging market conditions" after a more than 40% drop in Brent crude prices in the past 12 months led to deferred payments and project declines across the six-nation Gulf Cooperation Council (GCC). Oil prices may slide further after stockpiles expanded to a record of almost 3 billion barrels because of strong output from The Organization of the Petroleum Exporting Countries (OPEC) and elsewhere, the International Energy Agency said on Friday. Most governments in the region rely on income from crude to fund spending.
Given the retreat in oil prices and deaths in Paris, “it’s been a pretty negative weekend overall and the markets are responding to that," said Saleem Khokhar, the head of equities at the asset management group of National Bank of Abu Dhabi PJSC, the UAE’s biggest bank. “For us, it doesn’t change the underlying economics of the region."
Teams of Islamic State-backed gunmen killed 129 people in several sites across the French capital over the weekend, which President Francois Hollande called an “act of war." A day beforehand, the militant group sent suicide bombers to Beirut, killing at least 43 people in two attacks, minutes apart. There’s growing evidence that a bomb may have downed a Russian Metrojet plane over the Sinai peninsula last month.
Drake & Scull posted an 877.8 million-dirham ($239 million) attributable net loss in the three months through September, according to a statement to the Dubai bourse on Sunday. The average of three analyst estimates was for a loss of 16.2 million dirhams. The company slumped 10% to the lowest level on record.
“Drake & Scull results are adding oil to the fire," said Sebastien Henin, the head of asset management at The National Investor in Abu Dhabi.
Dubai’s Shuaa Capital PSC also slumped 10% to an all-time low. The investment company reported a third-quarter loss on Thursday after market close, as expenses climbed partly because of provisions for small- and medium-enterprise lending.
Qatar’s QE Index climbed 0.3%, ending its longest losing streak since 2003. Index provider MSCI Inc. said on Friday it will remove Gulf International Services QSC from its emerging-markets gauge this month and replace it with Qatar Gas Transport Co. Gulf International fell 2.1%.
Dana Gas PJSC, the UAE energy company producing oil and gas in Egypt and Iraq, was the second-most traded stock in Abu Dhabi after it posted its biggest quarterly loss since 2009 amid a 47% slump in revenue. The company’s shares fell 9.3% and Abu Dhabi’s ADX General Index decreased 2.5%.
Saudi Arabia’s Tadawul All Share Index decreased 2.6%. The stock exchange, the Arab world’s biggest, appointed an acting chief executive officer after Adel Saleh Al Ghamdi resigned. Al Ghamdi oversaw the bourse’s opening to direct foreign investment for the first time in June.
Gauges in Kuwait and Bahrain slipped 1.2% and 1%, respectively. Oman’s MSM 30 Index lost 0.2%.
Egypt’s benchmark gauge fell to a two-year low, with Commercial International Bank Egypt SAE, the nation’s biggest-listed bank, contributing most to the decline. The measure’s 14- day relative strength index dropped to 20 points, the lowest since August and a sign to some investors that it’s oversold.
Growing concern of a step-up in military action against the Islamic State will prompt foreign investors to cut holdings of Middle Eastern stocks, Cairo-based investment bank Pharos Holding said in an e-mailed report on Sunday. Egyptian equities will face added pressure as the attacks in Paris “will likely accentuate" the crisis in the country’s tourism industry following the suspected bombing of a Russian airliner last month, according to the note.
Standard & Poor’s cut the North African nation’s credit outlook to stable from positive on Friday, reducing the likelihood of a rating upgrade in the near term. The agency, which rates the country B-, cited its expectations for the government to continue to run high fiscal deficits and for Egypt’s Gulf allies to reduce their aid packages.
Israel’s TA-25 Index retreated 2.1%, the most in nearly seven weeks. Leading the descent was Perrigo Co. after the majority of its shareholders rebuffed Mylan NV’s hostile bid, which sent its US-traded shares tumbling.
“There are two reasons stocks are down and both happened on Friday," said Meir Slater, head of research at Bank of Jerusalem Ltd. in Tel Aviv. “After the Paris attacks, there are fears that this seminal event could impact the global economy for some time, which Israel is an inseparable part of. Second is Perrigo’s drop after Mylan’s bid failed."
Exports account for about one-third of Israel’s $304 billion economy. Bloomberg