DUBAI: Selling by foreign frontier funds sparked heavy profit-taking in the United Arab Emirates and Qatar on Thursday. Saudi Arabia also declined, but Egypt rose for a third day.
A number of companies from the UAE and Qatar remain part of MSCI's Frontier 100 benchmark even though the index compiler upgraded both countries to emerging market status in May.
MSCI's opted to gradually phase those stocks out of the frontier index through monthly weighting reductions and one of these takes effect on Nov.1.
This prompted a wave of selling by passive funds tracking the index on the final trading day before this milestone. Foreigners were net sellers in Dubai and Qatar, according to bourse data. Moreover, retail investors in Doha also joined the sell-off, leaving only local institutions as net buyers.
Dubai's index fell 1.7 percent.
MSCI index constituents Emaar Properties and Dubai Islamic Bank , which dropped 3.4 and 1.2 percent respectively, were the main drags. Abu Dhabi's bourse fell 1.8 percent, also due to MSCI benchmark members. National Bank of Abu Dhabi lost 5.3 percent and First Gulf Bank fell 2.4 percent.
Telecommunications firm Etisalat edged down 0.4 percent after its Saudi Arabian affiliate Etihad Etisalat (Mobily) on Thursday requested that its shares be temporarily suspended pending an audit committee meeting to consider "significant matters relating to its financial statements".
Qatar's benchmark fell 2.0 percent as blue chips Industries Qatar and Masraf Al Rayan dropped 3.4 and 2.9 percent respectively. In past months, declines linked to frontier market fund sell-offs were usually followed by quick rebounds. SAUDI, EGYPT
Saudi Arabia also extended declines, with the main index falling 0.5 percent.
Shares in petrochemicals giant Saudi Basic Industries dropped 1.2 percent and Al Rajhi Bank lost 0.6 percent. The insurance sector was hit particularly hard after rising to a six-year intraday high in the previous session.
It fell 1.3 percent despite insurers posting strong third-quarter earnings.
However, Mediterranean And Gulf Insurance And Reinsurance Co added 1.4 percent after its third-quarter profit surged more than tenfold.
Egypt's bourse maintained its recovery from a sharp drop earlier this month, rising 1.8 percent to take its gains to 5.4 percent since Monday. Blue-chip Commercial International Bank was the main support, jumping 3.5 percent.
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