DUBAI, (Reuters) – Gulf Arab stocks plunged on Thursday as weaker oil prices and tensions with Iran compounded a broad sell-off in emerging markets, sending some indexes down as much as 4 percent and erasing all the gains of 2008.
An anti-corruption campaign by the Dubai government has sent some investors scurrying, while many foreigners who have been forced to sell broad portfolios of emerging markets stocks are offloading Gulf shares as well, experts said.
“We are in a critical situation right now,” said Amjad Bakir at brokerage MAC Capital in Dubai.
Oman’s blue chip index .MSI shed over 4.3 percent to hit a low of 8,784 points, erasing all the gains of 2008 and falling 28 percent from its lifetime high set in June.
Qatar’s main index .QSI fell 2.26 percent to 10,014 points. The Doha benchmark has fallen 21 percent since reaching a 2-1/2-year high on June 11, meaning that it now joins the markets of Oman, Dubai and Saudi Arabia in bear territory.
Investors selling broad emerging market portfolios have been forced to offload Gulf shares as well, even though oil revenues assure sustainable growth in the region, said Yazan Abdeen, fund manager at ING Investment Management in Dubai.
“The only reason for the fall in the market is that all this bad news globally is contagious. The local investor has taken refuge by not investing, taking out liquidity, while there is at the same time a seller,” Abdeen said.
Earlier on Thursday Asian share prices fell to new two-year lows amidst further signs of a slowing global economy from the United States to the euro zone.
Concerns that earlier this year had centred on the United States are now expanding to other regions as well, contributing to the recent rebound of the dollar against other currencies.
The steep rebound in the dollar, plus concerns over weakening global demand, have also hit oil prices, with crude dipping towards $109 a barrel.
Investors may wake up to some of the fundamental value in Gulf blue chip companies that offer transparency and earnings growth, Abdeen said. Political risk may have scared some away due to nuclear tensions with Iran, but those, too, will fade, he said.
“The amount of depression in the market has crossed the point of factoring in all the risks and all the negativity,” he said. “If we want to discount the political risk in this region, we have to go back to the time of Adam and Eve.
At the end of September when the holy Muslim month of Ramadan ends and many investors return to the market, local support could rematerialise.
In the meantime, with negative headlines not letting up and investors waiting on the sidelines, more losses may be in store.
Several of the region’s bourses have lost so much in recent weeks further losses are likely to trigger even more selling, Bakir said.
“Fundamentally, the only thing we’re talking about is the Iran situation. The second thing is the corruption in companies. Every two weeks, it’s somebody else from a big company (who gets arrested),” he said.
“That’s why the foreigners are pulling their money out. They are not interested in our markets anymore — not until they see restrictions on these people.”