Middle East stock markets extended losses on Monday because of mostly disappointing earnings announcements, a fresh drop in oil prices, and a decline in global equities following a fresh rout in China. Brent dropped 2 percent and all major stock benchmarks fell after the CSI300 index of the largest listed companies in Shanghai and Shenzhen tumbled 8.5 percent.
The main Saudi stock index fell 2.4 percent, its biggest daily drop in four months, as stocks in the petrochemicals sector led losses. Abdullah Alawi, assistant general manager and head of research at Aljazira Capital in Riyadh, said the kingdom's market, which had been largely dormant throughout the Muslim holy month of Ramadan and the Eid al-Fitr holidays which ended last week, was still digesting the new, more bearish outlook for oil after the nuclear deal between the world powers and Iran.
"This was followed by measures taken by such prominent countries as the United Arab Emirates, which said it would switch subsidised to market-based fuel prices, and Kuwait, which is reviewing its subsidies system," Alawi said. "I think this increases the worries of Gulf Co-operation Council citizens, including Saudis, about the prospects for their economies and their welfare as well," he added, referring to the group of six oil-rich Gulf states.
Heavyweight Saudi Basic Industries (SABIC) tumbled 4.3 percent after NBK Capital downgraded the stock to "hold" from "buy" and said its earnings had most likely peaked for the short term. The company had reported better-than-expected second-quarter earnings on Sunday, citing higher product prices and cost-cutting, which briefly boosted its stock price. But analysts said it was unclear why exactly it had performed so well. Saudi Arabian companies usually post short earnings notices before publishing detailed financial reports days later.
Saudi International Petrochemical Co (Sipchem) tumbled 8.9 percent to 29.20 riyals in the heaviest trade since early May after announcing its quarterly profit had fallen 55 percent to 110.1 million riyals ($29.4 million). Analysts surveyed by Reuters had expected 133.3 million riyals. The stock broke technical support at 31.00 riyals, its lows since mid-May, triggering a bearish right triangle pointing down to the March and April lows around 26.00 riyals. National Industrialisation Co (Tasnee) dropped 3.3 percent, having swung to a net loss for the second quarter. Analysts had forecast a profit.
UAE, EGYPT Most Other Gulf markets suffered smaller losses, having closed earlier in the day when oil had slipped just a little from Sunday's close. Dubai's index inched down 0.1 percent as heavyweight lenders Dubai Islamic Bank and Emirates NBD rose 0.8 percent and 1.4 percent respectively, offsetting losses in most other stocks.
Also, engineering firm Drake & Scull rose 0.1 percent after saying it had won a 218 million dirham ($59.4 million) contract from an educational institution in Kuwait. Abu Dhabi's bourse slipped 0.2 percent. First Gulf Bank, down 0.7 percent, was the main drag. The UAE's third largest lender by assets posted an 8 percent rise in second-quarter net profit on Sunday, which was in line with analysts' estimates.
Qatar's index was almost flat, with an equal split between gainers and losers. Mobile phone operator Ooredoo fell 1.0 percent after its Kuwaiti subsidiary reported a 30 percent decline in quarterly profit. The Kuwaiti unit's shares fell 3.4 percent. Egypt's bourse fell 1.5 percent with most stocks in the red. The Cairo index had surged as much as 8.1 percent this month as it rebounded from a one-year low hit on July 9, so some investors may be booking profits now.
Also, Pioneers Holding said on Monday it was seeking an initial share offer by its affiliated real estate developer Rooya worth at least 1 billion Egyptian pounds ($128 million) this quarter. This could temporarily drain liquidity from the market.
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