Gulf markets decline on earnings fears

Regional equity markets fell today, with the Qatar bourse dropping to a four-and-half-year low following slides on US and UK exchanges on Friday in reaction to fears of lacklustre fourth-quarter earnings reports and further banking woes. The Dubai Financial Market (DFM) index fell 0.36 per cent to 1,637.78, led by sell-offs in the property and financial-services sector. On the DFM, Dubai Islamic Bank and Shuaa Capital fell 9.09 per cent and 9.9 per cent, respectively, to close at Dh0.90 and Dh1 each. Union Properties fell 4.22 per cent to close at Dh0.68.

Prices in the property and financial-services sectors also fell on the Abu Dhabi Securities Exchange, with Abu Dhabi Islamic Bank shares declining 9.35 per cent to close at Dh2.52 and shares in the real estate sector slipping 6.01 per cent. "We are in panic mode in the markets. Once panic eases and we have a more rational approach [towards the markets], telecommunications will benefit," said Mahdi Mattar, a member of Shuaa Capital's research team.

Sell-offs have spread to other sectors as well, particularly telecommunications. Analysts say that in global markets, there is a shift in investor interest from financial services and property to telecommunications. On the ADX, Etisalat shares fell 1.4 per cent to close at Dh10.70. On the DFM, the price of Etisalat's competitor du slid 5.93 per cent to close at Dh2.06. Analysts say that Gulf shares are falling on speculation that earnings reports will be lower than expected.

"In the first half of 2009, the main theme will be the decrease in corporate earnings," said Mr Mattar. "Negative news flow, cancellation of projects or layoffs... [will be the] main headwind against stock performance." Share prices fell on all Gulf exchanges, with Saudi's Tadawul exchange registering a 1.11 per cent decline to close at 4,648.21 on analyst forecasts that Saudi Basic Industries Corporation's (SABIC) profits will drop. SABIC, which is the region's biggest publicly traded company, declined for a fourth day in a row to close 6.16 per cent lower today at a value of 44.20 Saudi riyals.

Similarly, Oman's Muscat Securities Market 30 Index was down 1.93 per cent to close at 5,021.55. Kuwait's stock exchange declined 1.41 per cent to 6,979.7, while Bahrain's All Share Index shed 0.62 per cent to close at 1,745.28. Qatar's stock exchange fell 3.94 per cent to close at 5,410.66. Like many Gulf markets, the Abu Dhabi exchange saw an outflow of foreign investment. Shares held by foreign investors fell to just 9 per cent of the market last year, from 13 per cent a year earlier, according to a statement by the bourse.

"Despite the increase in 2007 and subsequent decrease last year, foreign investors have always been a relatively small part of the ADX market," said Tom Healy, the chief executive of ADX. Investors from the UK remained the largest foreign investors, followed by those from Qatar, Saudi Arabia, Kuwait and Luxembourg. The ADX fell 2.91 per cent today, settling at a value of 2,315.93. Total traded volumes on the exchange fell 4 per cent to 49.9 billion shares last year from 2007 levels, while the total value of equities traded increased 32 per cent to Dh232 billion (US$63.15bn) compared with Dh175bn the year earlier.

The property sector accounted for most of the trading value, with Aldar the most heavily traded security on the bourse. "Our priorities for 2009 are to develop markets for exchange-traded funds, debt securities and derivatives as well as continuing to enhance transparency and the regulatory environment," said Mr Healy. Abu Dhabi's index fell 47.5 per cent last year. After surging 12 per cent in the first six months, the benchmark dropped sharply. @Email:[e-mail]