Gulf stocks plummet in turbulent year; Dubai shedding almost three quarters of its value

KUWAIT CITY: Stock markets in the Gulf states yesterday ended 2008 sharply lower as the energy-dependent economies were battered by the global financial crisis while oil prices plummeted. Most of the seven markets witnessed their worst year ever with the bourse of the bustling Dubai shedding almost three quarters of its value and the Saudi market, the largest in the Arab world, slumping by more than half.

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More than $515bn were wiped off of their market value as their capitalisation stood at just $600bn compared to $1.116 trillion at the end of 2007. “It was a year of contradictions as share prices rose sharply in the first half but nosedived in the second half similar to the oil price scenario,” Kuwaiti economist Hajjaj Bukhdur said.

“The impact of the global financial crisis on the Gulf economies was much deeper than initially thought. Gulf stocks slumped even more than bourses in the West where the crisis began,” Bukhdur said. The Saudi Tadawul All-Shares Index (TASI) dropped 56.5 percent to close the year at 4,802.99 points, down from 11,175.96 points at the end of 2007. It was pulled down by a sharp slide in the leading banks and petrochemicals sectors.

Kuwait Stock Exchange, the second largest in the Arab world, shed 38 percent to finish the year at 7,782.60 points, almost a four-year low. However, it was down 50.3 percent from its all-time high set in late June. In the United Arab Emirates, the Dubai Financial Market slid 72.4 percent to close at 1,636.29 points, near its four-year low.

Its sister bourse, the Abdu Dhabi Securities Exchange, shed 47.5 percent to end the year at 2,390.01 points, also close to its four-year low. The two markets reeled under a severe correction in the leading real estate market which had experienced spectacular growth in the past few years.

The Qatar Securities Market was the least affected in the Gulf, shedding 28.1 percent to close at 6,886.12 points, while the Bahrain Stock Exchange shed 34.5 percent to finish at 1,804.07 points. The tiny Muscat Securities Market dipped 39.8 percent at 5,441.12 points. The impact was so severe that dozens of listed firms traded even at below their nominal values while many others slipped below their book values.

Leading companies were not spared. Saudi petrochemicals giant SABIC, the largest Arab company, dropped 68 percent, real estate developer Emaar, the largest Arab property firm, lost 85 percent, while Zain telecom, Kuwait’s largest company, shed more than 50 percent. Investor sentiment on the Gulf stock markets was shattered by the growing impact of the global economic downturn on the region which resulted in a wave of sell-offs that sent stock prices crashing.

The economies of the Gulf Cooperation Council (GCC) states, which account for around 20 percent of world oil supplies, have been hit by a slide in crude prices and revenues and massive losses to their huge foreign investments. Bukhdur said that the six-nation GCC, which groups Bahrain, Kuwait, Qatar, Oman, Saudi Arabia and United Arab Emirates, are estimated to have lost more than half a trillion dollars of their $1.5 trillion assets. Their hydrocarbon revenues dropped by around $200bn from the $700bn that had been anticipated when oil prices peaked at more than $147 in July.

“Most Gulf stocks also suffer from fundamental requirements like transparency and regulations,” said Bukhdur, who expected the slide to continue in 2009 due to discouraging economic indicators. The Saudi SAMBA group expected that the Saudi Gross Domestic Product (GDP) would shrink by 1.6 percent in real terms in 2009. Saudi Jadwa Investments drew a bleak picture. “Oil prices will be significantly lower than previously anticipated and reduced production will exacerbate the impact on oil revenues,” Jadwa said in a report.

“Lower oil revenues will mean the end to the huge budget and current account surpluses of recent years,” it added. The Institute of International Finance expected that real growth rates in GCC states will drop from around 5.7 percent in 2008 to around 3.7 percent next year. It also said that current account surplus will drop from $321bn this year to as low as $48bn in 2009.

Jan 01, 2009

Source: The Peninsula

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