Dubai’s stock index dropped 3.3 per cent yesterday, the biggest drop among regional stock measures, as investors sold shares on concern that lower oil prices would slow economic growth in a part of the world that has relied heavily on hydrocarbons.
Fund managers said, however, that government cash reserves and efforts to get revenue from other sources apart from oil would help to maintain economic growth in the long run.
The Dubai Financial Market General index shed 148.25 points to 4,400.8, paring its year-to-date gain to 30.6 per cent. Other benchmark indexes in the region also declined, with Abu Dhabi's ADX index falling 2.4 per cent to 4,830.74. The benchmark equities index in Saudi Arabia declined 1.6 per cent.
“It’s a mix of more than one factor,” said Tariq Qaqish, the head of asset management at Al Mal Capital. “The first one is that the significant drop in oil prices last month may eventually have an effect on the country’s growth plans. In addition, the geopolitical issue is a little bit tense.
Saudi Arabia rattled the oil market on Monday when it discounted the price of crude for its US customers. Since then oil prices have shed about 4 per cent.
“At current oil price levels the impact on spending plans is unlikely to be significant, not only in the UAE but also in other parts of the GCC,” said Sachin Mohindra, a portfolio manager at Invest AD, an Abu Dhabi-based asset manager. “The reason for that is the GCC has access to huge currency reserves that have been accumulated in the past. Oil has to stay low for a prolonged period for revenues to be affected.”
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