Published: Sep 25, 2014
Source: Saudi Gazette

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Saudi stocks lead Mideast drop on IS reprisal concern

Saudi Arabian stocks led declines in the Middle East amid investor concern that Arab nations may be at risk of retaliatory attacks by the so-called Islamic State militants.

The Tadawul All Share Index (SASEIDX) retreated for a fourth day, sliding 1.3 percent at 1:16 p.m. local time to 10,731.57, the lowest since Aug. 21. It was the second-worst performer among more than 90 gauges tracked globally by Bloomberg. Dubai’s DFM General Index slipped 1.2 percent at the close, while Qatar’s QE Index fell 0.5 percent.

Saudi Arabia, the United Arab Emirates, Bahrain, Qatar and Jordan joined the first wave of US-led airstrikes against the Islamic State in Syria yesterday, the broadest Arab-US military coalition since the 1991 Gulf War. They’re seeking to rein in militants who have rampaged through Syria and threatened to ignite a civil war in Iraq. Gauges in Oman and Kuwait, which weren’t involved in the attacks, increased 0.1 percent and 0.2 percent respectively.

“Investors are worried about retaliatory attacks in the countries that are involved,” Samer Mardini, a Dubai-based vice president at SJS Markets Ltd., said by telephone. “The Gulf countries’ involvement in the strikes against the Islamic State has triggered a much needed correction in the market.”

Stocks in Saudi Arabia, which shares a border with Iraq, climbed to the highest since 2008 this month after the Kingdom announced it plans to allow foreigners to invest directly in the bourse next year. The Tadawul’s 14-day relative strength index dropped to 40.3 on Wednesday, after climbing as high as 92 on Aug. 24. A level above 70 indicates to come technical analysts that a security or index is overbought and poised to decline.

Abu Dhabi’s ADX General Index retreated 0.1 percent while Bahrain’s main measure lost 0.2 percent. Moreover, Oil prices slid Wednesday as traders awaited the US crude inventories report and digested weak global economic data and the return of Libyan production to an already well-stocked market. Brent North Sea crude for delivery in November reversed 30 cents to stand at $96.55 a barrel in midday deals in London.

US benchmark West Texas Intermediate for November handed back 13 cents to $91.43 per barrel.

"Brent futures extended losses as disappointing economic indicators from the US and eurozone raised renewed concerns regarding a slowdown of economic growth and weaker than expected oil demand in the short-term," said senior analyst Myrto Sokou at the Sucden brokerage on Wednesday.

"Investors remain cautious as high crude oil inventories seem to offset any geopolitical risk in Middle East following the persistent tensions in Syria."

She added that US house price numbers and manufacturing survey data had both missed expectations on Tuesday, stoking worries over energy demand. The oil market was mixed Tuesday as traders also mulled poor eurozone business activity against better-than-expected Chinese manufacturing figures.

Sentiment was meanwhile hit Wednesday by news that Germany's Ifo business confidence indicator fell in September.

Traders will later switch focus to the US government's snapshot of American energy inventories for the week ending September 19, for clues about demand in the world's top crude consumer.

Crude reserves are expected to have risen by 500,000 barrels on average in the week to September 19, according to analysts polled by the Wall Street Journal.

Gasoline stockpiles are expected to fall by 200,000 barrels, while stocks of distillates, which include heating oil and diesel, are expected to rise by 300,000.

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