November 1, 2015

Muhammad Shabbir has been quoted in a market report published by Bloomberg.

Dubai’s stocks sank to the lowest level in more than two months, leading most Middle Eastern markets lower, on concern that Saudi Arabia’s debt downgrade will drive up borrowing costs across the region.

The DFM General Index dropped 2.2 per cent to 3,425.48 at 1:15 p.m. local time to the lowest level since 25 August. Saudi Arabia’s Tadawul All Share Index lost 1.1 per cent after Standard & Poor’s cut the country’s credit rating, citing an increase in the kingdom’s budget deficit after the slump in oil prices.

“The downgrade will have implications for banks and financial services sector across the region,” said Muhammad Shabbir, the head of regional equities at Rasmala Investment Bank in Dubai. “Banks’ credit ratings could come under pressure, not just for Dubai but for all across the Gulf Cooperation Council. This has implications for the costs of borrowing.”

S&P lowered Saudi Arabia’s rating on Friday to A+, five steps below the top grade, with a negative outlook. Saudi Arabia, OPEC’s biggest producer, has suffered as crude’s 40 per cent slide in the past 12 months strains government spending in a country that gets at least 80 per cent of its revenue from energy. Dubai is one of the seven members of the United Arab Emirates, whose oil reserves are the eighth-largest in the world.

Brent crude gained 1.6 per cent on Friday to $49.56 a barrel, paring its decline in the past 12 months to 42 per cent.

Dubai’s Emaar Properties, the company with the largest weighting on the gauge, led the retreat with a 3.9 per cent drop. Dubai Islamic Bank, the UAE’s biggest Shariah-compliant lender, slipped 2.3 per cent.

“We see more bad news coming with the recent downgrade of Saudi Arabia,” said Tariq Qaqish, the head of asset management at Dubai-based Al Mal Capital PSC. “Oil is not breaking the $50 level and, most importantly, liquidity is drying up.”

Gulf banks are seeing surplus cash decline because of the slump in crude. The three-month Saudi Interbank Offered Rate, a benchmark used to price some loans, climbed to the highest since February 2013 on Sunday. The Emirates Interbank Offered Rate in the UAE is trading near the highest in two years.

Abu Dhabi’s ADX General Index and Qatar’s gauge fell 0.6 per cent, each. Kuwaiti stocks lost 0.2 per cent, while Bahrain’s All Share Index was little changed. Oman’s MSM 30 Index rose 0.3 per cent led by National Bank of Oman’s 5.3 per cent increase.

Egyptian stocks retreated 0.2 per cent. Authorities began investigating the crash of a Russian airplane in the Sinai Peninsula that took the lives of all 224 passengers and crew members on board. Officials from Egypt and Russia have doubted the Islamic State’s claim that it shot the plane down.

“Tourism numbers are already down significantly,” said Mohamed Ebeid, the head of brokerage at EFG-Hermes. “I think everyone is waiting to see the real cause of the accident before judging the outcome.”

Israeli shares declined 0.2 per cent, led by dual-listed companies Perrigo Company and Teva Pharmaceutical Industries, which fell in the US on Friday.

Tel Aviv’s oil and gas index advanced the most in a week on expectations Minister of the Economy Aryeh Deri will resign, removing a hurdle for the approval of the nation’s natural gas policy. That will allow the companies to begin development of Israel’s largest offshore gas field.

“We see an upside for gas stocks as the resignation of Deri promotes a scenario in which the gas framework will be passed and the industry developed,” said Sagie Poznerson, the head of trading at Leader & Co. Investment House in Tel Aviv.

Turkish citizens went back to the polls for the second parliamentary elections in less than six months. The inconclusive vote in June spurred a selloff in Turkish assets as political parties failed to establish a coalition government, raising questions over who will run the nation’s $800 billion economy. The slump ended last month amid signs that some parties are willing to create alliances should Sunday’s vote result in another hung parliament.

October was the lira’s best month in almost four years as it rose 3.8 per cent to 2.9150 against the dollar. The Borsa Istanbul 100 Index and the government’s 10-year bonds both rallied the most in a year.

Brent crude gained 1.6 per cent on Friday to $49.56 a barrel, paring its decline in the past 12 months to 42 per cent.