August 23, 2015 / 2:56 PM / 4 years ago

MIDEAST STOCKS-Plunge on oil price drop, Fitch cut to Saudi outlook

* Indiscriminate selling across markets, sectors
    * Fitch feeds into concern about Saudi forwards move
    * Dubai falls 7 pct, biggest fall since December
    * Saudi Arabia's losses total 18 pct this month
    * Egypt caught up in emerging market scare

    By Andrew Torchia
    DUBAI, Aug 23 (Reuters) - Major Middle Eastern stock markets
plunged in relentless selling on Sunday because of sliding oil
prices, a decision by Fitch Ratings to cut its outlook for Saudi
Arabia's debt, and Friday's sharp losses on Wall Street.
    Dubai suffered its biggest one-day fall since last December,
with its main index tumbling 7.0 percent to 3,451
points, its lowest close since March 30. The index finished just
off the intra-day low and close to major technical support on
the March low of 3,233 points.
    Saudi Arabia's benchmark lost 6.9 percent to 7,463
points, nearing support on its December low of 7,226 points.
That brought its losses so far this month to 18 percent - a drop
which has erased some $75 billion of market value.
    "There was no discrimination in the selling - it was across
markets, across sectors, across names," said Sebastien Henin,
portfolio manager at The National Investor in Abu Dhabi.
    He noted that even stocks in traditional defensive
industries such as telecommunications and food were hit hard in
the Gulf. "That was a bit worrying."
    The major Gulf oil exporting states have huge fiscal
reserves which will allow them to prevent cheap oil from
damaging their economies for years. Nevertheless, the fact that
a clear base for oil prices has still not emerged is spooking
investors.
    Their jitters were magnified by Fitch lowering its outlook
for Saudi Arabia's foreign and local currency issuer default
ratings to "negative" from "stable". Standard & Poor's cut the
kingdom's outlook to negative in February; the third major
rating agency, Moody's, has not yet taken such action.
    Most bankers and economists in the region think Riyadh is
very unlikely to favour the risky step of breaking the riyal's
 peg to the U.S. dollar, and believe the scale of it
foreign reserves mean it won't be forced into such a measure for
many years at least. 
    But one-year U.S. dollar/Saudi riyal forwards have jumped to
their highest levels since 2003 in the last few days as banks
have hedged against the risk of the peg breaking - further
alarming the equity market. 
    The United Arab Emirates has a more diversified economy than
Saudi Arabia and is fiscally stronger. But it, like other
markets around the region, is vulnerable to a pull-out of Saudi
money if Riyadh slumps.
    
    SUPPORT
    Henin said it was difficult to identify support for the Gulf
markets in their current mood and it might require a
stabilisation of oil prices and big foreign equity markets, and
therefore an easing of worries about China's economy, for
selling in the Gulf to dry up.
    When that happens, there may be substantial buying back of
stocks in markets such as the UAE, where valuations have reached
attractive levels, he said. The UAE is trading near 11 times
this year's projected corporate earnings - reasonable in
historical terms and compared to other emerging markets.
    More than 10 Dubai stocks plunged by their daily 10 percent
limits on Sunday, including builder Arabtec. Top real
estate developer Emaar Properties sank 8.3 percent.
    In Saudi Arabia, petrochemical producer Saudi Basic
Industries Corp lost 9.1 percent, miner Ma'aden
 was down 9.8 percent and Alinma Bank sinking
5.9 percent.
    Abu Dhabi's index fell 5.0 percent and Qatar 
was down 5.3 percent.
    Egypt's stock index dropped 5.4 percent. Although
Egypt's economy should benefit from low oil prices, it receives
aid and investment from the Gulf.    
    
    SUNDAY'S HIGHLIGHTS
    
    SAUDI ARABIA
    * The index tumbled 6.9 percent to 7,463 points.
    
    DUBAI
    * The index plunged 7.0 percent to 3,451 points.
    
    ABU DHABI
    * The index sank 5.0 percent to 4,286 points.
    
    QATAR
    * The index lost 5.3 percent to 10,750 points.
    
    EGYPT
    * The index slid 5.4 percent to 6,784 points.
    
    KUWAIT
    * The index fell 2.4 percent to 5,909 points.
    
    OMAN
    * The index dropped 2.9 percent to 5,911 points.
    
    BAHRAIN
    * The index fell 0.4 percent to 1,315 points.

 (Editing by Ruth Pitchford)
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