DUBAI: Saudi Arabia’s index slumped to a nine-month low on Sunday and most Gulf Arab markets also slid on fears unrest was spreading in the region.
The kingdom’s benchmark fell 5 percent to its lowest level since June 6, with investors unmoved by a $37 billion social spending plan announced by the country’s monarch last week, while Oman’s index fell 2.8 percent to a 22-week low as protests in industrial centre Sohar turned deadly.
"You would have thought markets would take the announcement of the (Saudi) stimulus plan positively," said Akber Naqvi, fund manager at Al Masah Capital.
"But this shows the general unease prevailing in the region. Regardless of what people think as to whether the events may be good in the long-term, markets do not like uncertainty and such events affect confidence," Naqvi said.
While protests have unseated veteran rulers in Egypt and Tunisia, Libya is in revolt and Bahrain remains in turmoil, Saudi Arabia has seen little dissent.
Yet fears unrest could spread in the kingdom caused panic selling. On Thursday, Saudi Shi’ites held a small protest in the oil-producing Eastern province, close to Shia majority Bahrain.
Saudi’s Arabia’s 25 largest stocks fell, including Samba Financial Group, down 6 percent, Riyad Bank down 5.9 percent and telco Zain Saudi down 10 percent.
"You have to drill down quite far to find buyers and it doesn’t take much selling pressure to push the market down given the low liquidity at the moment," said Matthew Wakeman, EFG-Hermes managing director for cash and equity-linked trading, adding many other regional markets followed Saudi lower.
Oman Police fired rubber bullets on stone-throwing protesters demanding political reforms, killing two people on Sunday.
"Muscat is peaceful, but Sohar is not far away and troubles there are not giving us much comfort," said an Oman fund manager who asked not to be identified. "Foreign investors are nervous and have been selling. Today more local investors joined in."
Renaissance Services fell 6.8 percent and telecoms operator Nawras dropped 4.2 percent.
"Geopolitical risk is the main focus, so company selection is not the biggest priority — it’s more about exposure to the region," said Marwan Shurrab, vice-president and chief trader at Gulfmena Alternative Investments.
Dubai fell 0.9 percent to its lowest close since Aug. 15.
"International investors, especially, have taken a more risk -adverse stance on the Middle East and all markets have been heavily hit," said Walid Shihabi, Shuaa Securities chief executive.
Oil prices hit 29-month highs last week, but have done little to boost sentiment in the world’s top crude exporting region.
"Oil hasn’t been a primary driver of Gulf equity markets for a while, except in improving margins at petrochemicals producers," said Shihabi. "The worry is that rising oil prices might stall a global economic recovery."
Lower economic activity would likely weigh on future oil demand and, with it, prices.