Middle East bourses fell sharply yesterday as investors cashed out after Brent crude oil slipped below $30 a barrel and global markets resumed selling off.
The Saudi index tumbled 3.3% to close at 5,838 points, its lowest finish since March 2011, after a heavy wave of sales in the final hour of trade.
Traders said margin calls added to the pressure, especially in smaller-capital stocks favored by local speculators. Most insurance stocks, which are generally illiquid and therefore harder to exit, nosedived more than 6%.
Petrochemicals were also a drag on the index; with the sector’s sub-index tumbling 3.1%. Saudi Kayan Petrochemical sank 8.7% after it reported a net loss for the fourth quarter, its largest since it listed in 2007, according to a note by NCB Capital. The company is an affiliate of Saudi Basic Industries Corp (Sabic), whose shares fell 2.2%.
Major lenders National Commercial Bank and Banque Saudi Fransi gave back early gains and fell 1.7 and 2.2% respectively, even though their quarterly earnings beat analysts’ forecasts.
But food producer Halwani Brothers climbed 2.5% after reporting a 63% rise in net profit.
In Egypt, mass selling by global and regional fund managers, which started at mid-session on Wednesday, extended into yesterday’s session. The index sank 5.6% to 5,858 points, its lowest level since October 2013. Investment firm Qalaa Holdings was down 8.3% at 1.22 Egyptian pounds, a record low.
“Foreign investors are exiting their positions and this is causing panic,” said a Cairo dealer.
To a large extent, Egypt is simply being caught up in a broad emerging market down trend. But investors are also concerned about the risk of currency devaluation this year, as the country’s foreign reserves remain perilously low, and by disappointing growth.
The economy is set to grow 4.1% this financial year, marginally weaker than the previous year and short of the government’s target.