Saudi Arabia’s shares retreated to the lowest level since March as the nation’s oil minister said no one should cut output to stem falling crude prices. Dubai’s measure declined.
The Tadawul All Share Index (SASEIDX) lost 1.7 percent to 9,081.27 at the close in Riyadh, the lowest since March 3 and about 162 points away from entering a bear market. Samba Financial Group led the decline with a 4.9 percent drop. Dubai’s DFM General Index fell 2.5 percent to the lowest close in almost three weeks. Saudi and Dubai shares were among the world’s five worst performers, according to data compiled by Bloomberg.
Saudi Arabia, the U.S. and other oil producers shouldn’t cut output and the market will stabilize itself, Oil Minister Ali Al-Naimi said in Vienna today. Members of the Organization of Petroleum Exporting Countries will meet tomorrow in the Austrian capital to decide on a response to a 29 percent slump in oil prices this year.
“With OPEC’s biggest member hinting that it isn’t going to cut production, regional stocks are taking a beating this morning,” Ramez Merhi, a Dubai-based director for asset management at Al Masah Capital Ltd., said by e-mail. Markets will continue to decline “until we find a floor on the oil price,” he said.
Saudi Arabia is the world’s biggest oil exporter and needs prices to average $99.2 a barrel this year to balance its budget, according to Deutsche Bank AG. Brent was little changed at $78.31 a barrel today.
“Any price below $90 consumes the Saudi reserves which were accumulated during the last three years,” Wadah Al Taha, chief investment officer of Dubai-based Al Zarooni Group, said by phone. “The longer it stays on lower levels, it increases the chances of cuts in government spending.”
Saudi Arabia, which holds the world’s third-biggest reserve assets, pursues spending plans valued at more than $500 billion. The Kingdom along with Oman and Bahrain risk running a budget deficit next year if their spending plans don’t change to cope with declining crude prices, Masood Ahmed, director of the Middle East and Central Asia department at the IMF, said in an Oct. 27 interview in Dubai.
The Tadawul’s 14-day relative-strength index fell to 28.1. A level below 30 indicates to some analysts that securities have fallen too fast and may rebound.
The kingdom is removing barriers to its stock market, one of the most restricted in the world and the largest in the Middle East. Foreigners are barred from barred from directly buying and selling domestic assets.
In Dubai, Emaar Properties PJSC dropped the most in more than a month, retreating 5.3 percent to 10.75 dirhams. Shareholders of the builder of the world’s tallest tower approved a 9 billion-dirham ($2.45 billion) extraordinary dividend on Nov. 24.
“The stock will become ex-dividend on Dec. 1 and some people are selling aggressively to come back again at a lower level to still get entitlement for the dividend,” said Muhammad Shabbir, head of equities at Rasmala Investment Bank Ltd. in Dubai.
Abu Dhabi’s ADX General Index lost 0.9 percent. Kuwait’s SE Price Index slid 0.1 percent and Bahrain’s BB All Share Index fell 0.2 percent. Qatar’s QE Index rose 0.7 percent.-Bloomberg
