Gulf shares drop on Mideast unrest – SMH

Posted on February 21, 2011 by

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Stocks markets across the Gulf Arab states fell on Sunday, with Dubai’s largest exchange registering the steepest drop as unrest in the Mideast lapped at the shores of oil kingpin Saudi Arabia.

The Dubai Financial Market closed down 3.66 per cent, to 1536 points, with developer Emaar Properties’ shares sliding 4.73 per cent. The company was the force behind the Burj Khalifa, the world’s tallest building. In Kuwait, the benchmark index closed down 2.52 per cent, to 6394, bringing its year-to-date losses to more than 8 per cent.

The drops in the oil-rich Gulf region’s exchanges are largely linked to the unrest in Bahrain, where massive protests have roiled the island nation for more than a week as the Shi’ite majority presses the Sunni monarchy for greater rights and freedoms. Meanwhile, a bloody crackdown on protesters in Libya has further rattled markets as the unrest spilled over to the first major oil producer in the Middle East.

The uprisings in Libya and Bahrain “mark a new turn in the crisis,” said brokerage house Nomura in a research note received on Sunday.

“Regional hydrocarbon producers are now being threatened, and sectarian divisions (notably in Bahrain) are increasing the risk of cross-border involvement in what have largely been domestic revolutions thus far.”

Sunday is the start of the work week in the Arab world, except for Saudi Arabia, and the market selloffs reflected investors’ first chance to weigh in on the developments over the weekend.

The protests in Bahrain marked the first time the unrest sweeping across the Arab world has seriously challenged the entrenched regime in one of the wealthy Gulf Cooperation Council nations.

Also aflame is Yemen, the Arab world’s most impoverished nation, which sits on the south-western tip of the Arabian Peninsula.

The unrest on Saudi Arabia’s doorstep has sparked fears of a spillover into the country, with concerns focusing both on the Sunni-Shi’ite divide in Bahrain and the fact that a significant change in Bahrain’s political system could spark calls for similar reforms in Riyadh, which sits atop the world’s largest proven reserves of conventional crude oil.

Saudi Arabia has a Shi’ite minority primarily located in its eastern province, where the bulk of its oil is located.

Any hint that stability is in question in the kingdom – the de facto leader of the 12-nation Organisation of the Petroleum Exporting Countries – could send oil prices surging across the world, threatening a continued global economic recovery.

“It’s a general risk aversion in the region as a whole,” said John Sfakianakis, chief economist with the Saudi Arabia-based Banque Saudi Fransi, explaining the drops in the region’s markets.

With Egypt’s market still shuttered after the unrest that toppled Hosni Mubarak, and the protests jumping from one Arab nation to the next, investors “are basically trying to hedge themselves against downside risks”, Sfakianakis said. “And the downside risks are accumulating.”

Saudi Arabia’s TASI index closed down 0.78 per cent to 6333 points, building on a 1.6 per cent slip on Saturday, the start of the work week in the country.

In Kuwait, shares of telecommunication giant Zain fell 7.25 per cent to 1.28 Kuwaiti dinars.

The slide came a day after the investment company headed by Saudi billionaire Prince Alwaleed bin Talal withdrew its offer to buy a 25 per cent stake in the Kuwaiti telecom operator’s division in the kingdom.

Kingdom Holding said in a statement on Sunday it believed the nonbinding offer it had submitted was “a reasonable offer to the shareholders of KHC and Zain Kuwait.”

Qatar’s exchange was down 1.6 per cent, to 8563 points, while Abu Dhabi’s exchange was off 1.91 per cent to 2632 points.

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Posted in: Middle East