Khaleej Times - Stocks nosedive after crude oil prices crash

The UAE and GCC stock markets continued to bleed on Monday, with all bourses losing massively in line with the fall in other global markets, due to the oil price war concerns between Russia and Opec.

With local and regional shares dropping to multi-year lows, analysts believe that the current prices are quite attractive and more economical than the MSCI Emerging Markets Index. But they advised to pick shares with high dividend yields and strategic sectors.

The Kuwaiti market was the biggest loser again on Monday among the regional bourses, plunging 10.3 per cent and triggering trading suspension for the second consecutive day.

The Dubai Financial Market and the Abu Dhabi Securities Exchange lost 8.3 per cent and 8.0 per cent, respectively. Saudi Arabia's Tadawul index plunged 7.7 per cent; the Qatar bourse lost 9.7 per cent; Bahrain plummeted 5.8 per cent, and the Omani index dropped 5.5 per cent on Monday.

Blue-chip shares such as Emaar Properties and Ajman Bank are trading at 52-week lows. Saudi Aramco ended down 5.5 per cent at SR28.35 as Arqaam Capital cut its Aramco rating to hold. Data showed that the UAE and Gulf investors lost Dh310 billion of their wealth in the last two trading sessions, including Dh160 billion on Monday.

On a free-float basis, investor wealth in the UAE and GCC regions further declined by Dh160 billion, with investors in Dubai and Abu Dhabi losing Dh10 billion ($2.62 billion) and Dh16.54 billion ($4.47 billion), respectively. While Saudi investors lost Dh72.5 billion ($19.75 billion), Kuwaitis lost Dh31.2 billion ($8.5 billion) and Qataris lost Dh24.22 billion ($6.6 billion), according to Century Financial data.

The number is much higher when the total market capitalisation is considered. The UAE and GCC regions lost over $187 billion (Dh686.3 billion) in a single day with Abu Dhabi recording losses of Dh37 billion ($10 billion), Dubai suffered Dh20 billion ($5.57 billion), Tadawul losing SR555 billion ($150 billion) and Qatar losing QR44 billion ($12 billion), it said.

Devesh Mamtani, president for investment and advisory services at Century Financial, said that GCC shares are cheaper when compared to major emerging markets.

"The DFM index is trading at 7.52 P/E while ADX is trading at 11.95 P/E. This is even lower when compared to the Chinese stocks which are trading at P/E of 14.25. Tadawul All-Share Index is trading at P/E of nearly 17.5 which appears cheaper when compared to the Indian markets with Nifty trading at a P/E of 20.44. The P/E multiple for all the other GCC indices are in the range of 10-12 lower than the P/E of MSCI emerging market index of 14.15," he said.

Issam Kassabieh, an independent financial analyst, suggested that the investors should look at the regional markets from the global perspective with the potential recession in sight.

"Investors should be very cautious - it is a game of Russian roulette. Investors just focus on equities with high dividend yields around the world. Generally, shares with very strong fundamentals might not be impacted significantly. Therefore, investors should focus on sectors like technology, education, healthcare and space," said Kassabieh.

"The Saudi reaction to the breakdown (with Russia) was to revert to the 2014 playbook. By precipitating an oil price collapse, they are looking to end their subsidy of higher-cost producers," said Akber Khan, head of asset management at Al Rayan Investment. "This is a painful strategy that requires time to play out and failed on the previous attempt."

Refinitiv data showed that international bonds issued by GCC governments dropped on Monday as oil prices plummeted. Omani bonds maturing in 2048 were down 7.6 cents, Abu Dhabi papers due in 2047 fell 3.4 cents and Bahraini notes due in 2047 were five cents lower.

Stock markets across Asia and Europe were also hammered as investor confidence was jolted by oil war concern on Monday.

India's Sensex retreated 6.2 per cent to 35,255.73 while Hong Kong's Hang Seng sank 4.2 per cent to 25,047.42. The Shanghai Composite Index declined to 2,943.29. The S&P-ASX 200 in Sydney retreated to 5,760.60. The Kospi in Seoul lost 4.2 per cent to 1,954.77.

In Europe, London's FTSE 100 tumbled 6.5 per cent to 6,039 after opening down by more than eight per cent. Frankfurt's DAX shed 6.2 per cent to 10,825 and the CAC 40 in France lost 6.7 per cent to 4,797. Italy's FTSE MIB plunged 9.8 per cent to 18,755.

Trading on U.S. stock exchanges was halted immediately after opening, as the benchmark S&P 500 fell seven per cent to its lowest since June 2019, triggering an automatic 15-minute cutout put in place after the 2008-2009 financial crisis.

In early trade, the Dow Jones Industrial Average was down 1,424.47 points, or 5.51 per cent, at 24,440.31, while the S&P 500 was down 160.27 points, or 5.39 per cent, at 2,812.10. The Nasdaq Composite was down 446.08 points, or 5.20 per cent, at 8,129.54.

Source: Khaleej Times