Drops in Saudi Arabia fuel Mideast markets slide

AP News
Posted: Mar 02, 2011 7:58 AM
Drops in Saudi Arabia fuel Mideast markets slide

Investors rattled by spreading Mideast unrest drove stocks across the Arab world down sharply Wednesday, with regional heavyweight Saudi Arabia's exchange suffering another day of steep declines.

The kingdom's benchmark Saudi All Shares Index tumbled 4.4 percent in late afternoon trading, piling on to losses sustained in a 6.8 percent rout late in the previous session after most other regional markets had closed.

"Investors are very jittery. There is clearly panic selling," said John Sfakianakis, chief economist with the Riyadh, Saudi Arabia-based Banque Saudi-Fransi, who said he expects the sell-off to continue. "Whenever this jittery panic sets in, it has a snowball effect."

The Saudi index has lost about a fifth of its value since the start of the year even as oil prices _ the kingdom's main source of revenue _ are pushing back toward $100 a barrel on the New York Mercantile Exchange.

Investors fear the demonstrations that have shaken Bahrain and Oman could spread elsewhere in the Gulf, including OPEC kingpin Saudi Arabia, the largest Arab economy. Anti-government organizers are calling for rallies in Saudi Arabia on March 11, though it remains unclear how much support opposition groups have.

Increasing unrest in North Africa, particularly Libya, a significant oil producer, is putting further pressure on Mideast markets. Libyan leader Moammar Gadhafi again vowed on Wednesday to fight to the "last man and last woman" to defend his country against anti-government rebels who hold parts of Libya's east.

Stock sell-offs in Asia and Europe and a lack of a clear end game for the regional unrest give investors little incentive to buy into regional markets, analysts say.

"The news flow is negative. The uncertainty is there," said Akram Annous, Middle East and North Africa strategist at Dubai-based Al Mal Capital.

The Dubai Financial Market's benchmark index dropped 3.5 percent to close at 1,374 points.

Shares of the Dubai developer of the world's tallest tower, Emaar Properties, plunged 6 percent Wednesday. The Dubai Financial Market's own shares shed 4.9 percent.

National Central Cooling Co., also known as Tabreed, plunged 7.6 percent after it disclosed that it would tap into as much as 3.1 billion dirhams ($845 million) in new funds from Abu Dhabi state investment fund Mubadala Development Co.

Annous said investors are selling off shares of many Gulf-based companies not necessarily because they expect significant unrest in places such as Dubai, Abu Dhabi or Qatar, but because of the potential ripple effects to their business elsewhere in the Arab world. Uncertainty in potential growth markets in North Africa such as Egypt, Tunisia and Libya makes it difficult for Mideast companies to plan ahead, he said.

"It's more that you're worried about how you're going to grow in the region," Annous said. "You need to get back to that simple process where you know who's in control. Right now you don't even know who you're supposed to have dialogue with."

Markets elsewhere in the region also fell.

Qatar's stock index dropped 3.6 percent to 7,657 points. Kuwait fell 2.3 percent to 6,158.