October 11, 2018 / 2:17 PM / 2 months ago

MIDEAST STOCKS-Saudi blue-chip plunge leads region lower

* Saudi index suffers biggest fall since January 2016

* Main trigger is international market conditions

* Some suggest Khashoggi disappearance also a factor

* Jarir bucks downtrend after strong Q3 earnings

* Egypt sinks amid capital outflow worries

By Abinaya Vijayaraghavan

Oct 11 (Reuters) - Middle Eastern stock markets fell sharply on Thursday, led by Saudi Arabia, where the index plunged 3.9 percent in its biggest drop since January 2016 as weakness in global bourses and a pull-back in oil prices alarmed investors.

The Saudi index’s slide in heavy trade saw big falls by some of the top blue chips favoured by foreign investors. Petrochemical producer Saudi Basic Industries tumbled 5.1 percent and Al Rajhi Bank sank 4.4 percent.

“Today’s market decline was expected, given the sell-off seen in international markets, led by the U.S. All major markets have witnessed the brunt of this selling pressure, as investors seem to be closing their positions,” said Faisal Hasan, chief business development officer at Kuwait’s KAMCO Investment.

While fund managers and analysts agreed international market conditions were the trigger for Riyadh’s drop, some suggested the disappearance of Saudi journalist Jamal Khashoggi, which has fuelled a backlash against Saudi Arabia in the U.S. Congress, may also have played a role.

“Politics remains a key threat to the Saudi economy,” Jason Tuvey, senior emerging markets economist at London’s Capital Economics, said in a report.

“The disappearance of Saudi journalist Jamal Khashoggi in Istanbul raises fresh questions about Crown Prince Mohammed bin Salman’s reputation as a reformer and political developments pose a growing threat to the economic outlook.”

The riyal came under moderate pressure against the U.S. dollar in the forwards market, while the cost of insuring Saudi sovereign debt against default, which has been near four-year lows, rose to a seven-week high.

Among the few gaining stocks in Saudi Arabia, retailer Jarir Marketing rose 0.9 percent after estimating third-quarter net profit rose to 288 million riyals ($76.8 million), above Refinitiv’s median analyst forecast of 260 million riyals.

In Egypt, the blue-chip index fell 2.5 percent. In addition to global equity weakness, an online newspaper quoted the deputy finance minister as revealing foreign holdings of Egyptian Treasuries had declined nearly 20 percent from the end of June. Such outflows could weaken the currency.

Meanwhile, Egypt’s annual urban consumer inflation rose to 16 percent in September from 14.24 percent in August, official data showed on Wednesday. This may postpone the next interest rate cut to late 2019.

El Sewedy Electric dived 5.7 percent and Global Telecom Holding plunged 7.5 percent.

Foreign investors were net buyers early in the day but by the close, were net sellers by a ratio of about three to one, exchange data showed.

In Dubai, the index fell 2.0 percent, dragged down by banks and real estate shares. Dubai Islamic Bank lost 1.9 percent to 5.25 dirhams despite reporting a 10.8 percent rise in third-quarter profit on Wednesday.

Arqaam Capital said the bank’s growth strategy remained intact but documentation, security and other processes related to corporate underwriting had delayed some growth until the fourth quarter. Arqaam has a “buy” rating on the stock with a target of 7.2 dirhams.

Construction firm Drake and Scull dropped 4.7 percent in heavy trade, while Emaar Properties slid 2.4 percent and Emirates NBD fell 2.4 percent.

United Arab Emirates inflation data for August, released on Wednesday, showed a fall in housing prices accelerating; housing and utility costs dropped 3.9 percent from a year earlier.

The Qatar index fell 1.0 percent, pressured by industrials and banks. But Qatar National Bank was flat after its third-quarter results. The Middle East’s biggest bank reported a 3.5 percent rise in third-quarter net profit, at the high end of forecasts, with growth dampened by a weak Turkish lira. SAUDI ARABIA * The index plunged 3.9 percent to 7,531 points. DUBAI * The index fell 2.0 percent to 2,755 points. ABU DHABI * The index dropped 0.9 percent to 4,968 points. QATAR * The index slid 1.0 percent to 9,862 points. KUWAIT * The index shed 0.6 percent to 5,257 points. BAHRAIN * The index dropped 0.4 percent to 1,316 points. OMAN * The index fell 0.4 percent to 4,490 points. EGYPT * The index dived 2.5 percent to 13,283 points. (Editing by Andrew Torchia and David Evans)

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