Saudi Arabia's stock market led most Gulf bourses lower on Sunday after oil prices plunged nearly 8 percent at the end of last week, while concern about new regulations for banks dragged down Egypt's bourse. The slide of the Brent oil price from $85 a barrel at the start of October to below $65 has wiped $130 billion or 9 percent of gross domestic product off the Gulf's oil export revenues on an annualised basis, London-based Capital Economics estimated last week.
That may do little direct damage to Gulf economies; fiscal reforms in the last few years mean most governments will remain able to spend more on economic growth next year, and they do not face balance of payments crises. But Brent is now at $58.80 and if it stays near that level, governments may become more cautious about spending and could resort to borrowing more, pressuring liquidity in banking systems. Private sector businessmen may become less willing to invest for the long term.
The Saudi stock index sank 1.3 percent on Sunday as all 12 banking stocks and 13 of 14 petrochemical stocks dropped, with the biggest, Saudi Basic Industries, losing 1.7 percent. The only petchem to gain was Saudi Arabian Fertilizers, up 0.8 percent.
Anaam Holding surged 4.5 percent in its heaviest trade since September 2012. It had jumped its 10 percent limit on Thursday after it signed a non-binding memorandum of understanding to buy real estate and commercial assets owned by Abdullah Abbar & Sons Cold Stores and Dar Al Abbar Co.
In addition to falling oil prices, the Saudi market has been dampened in the last few weeks by concern that the country's ties to the West could be damaged by the international furore over the killing of journalist Jamal Khashoggi. Other Gulf markets fell more modestly on Sunday, with Dubai losing 0.6 percent as Shuaa Capital dropped 3.7 percent. Abu Dhabi's index fell 0.8 percent as Abu Dhabi Commercial Bank slipped 2.7 percent, while Qatar's index dropped 0.7 percent as petrochemical producer Industries Qatar retreated 1.0 percent.
In Egypt, the blue-chip index plunged 3.8 percent as the biggest lender, Commercial International Bank (COMI), tumbled 7.9 percent. The bank has a weighting of about a third in the index. A trader in Cairo said investors were selling the stock because of concern over the impact on the banking sector of new Egyptian banking regulations now being phased in, which include a rise in minimum capital requirements for banks.
Pharos Holding released a report estimating that proposed changes to the way banks' earnings from Egyptian Treasury bonds were calculated would raise their effective tax rates. With the new system, COMI's bottom line in 2017 would have been 17 percent lower, Pharos said. The trader said the regulations had not yet been approved by parliament and banks were lobbying to alter them, but "there's a lot of uncertainty about it and this is making people nervous." Eight of 10 traded bank stocks dropped, but most others fall by smaller margins; Housing and Development Bank was down 3.6 percent.
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