Mideast Stocks Drop Despite $47 Billion of Central Bank Aid

(Bloomberg) -- Most equity markets in the Middle East fell on Sunday, despite efforts by central banks across the region to protect economies from shocks related to the coronavirus and plunging oil prices.

Dubai’s main index fell 3.4% by the close and Abu Dhabi’s dropped 1.9%, even after the United Arab Emirates announced 100 billion dirhams ($27.2 billion) of monetary stimulus over the weekend. Egyptian stocks had their worst day since 2012, weakening more than 9%. The gauge in Saudi Arabia also traded lower.

The U.A.E.’s Targeted Economic Support Scheme includes 50 billion dirhams of zero-interest, collateralized loans for banks. In addition, lenders will be allowed to reduce their capital buffers, which will inject 50 billion dirhams of liquidity.

“I remain focused on the demand side,” Ali Taqi, the head of equities at Rasmala Investment Bank in Dubai, said in an interview with Bloomberg TV. “How are you going to stimulate demand? Restaurants, cafes are a lot emptier now. Having a relief is good, but business is much more concerned with the decline in footfall. It will take some time for people to feel comfortable again.”

The U.A.E.’s measures follow those of other Middle Eastern nations. Saudi Arabia’s central bank unveiled a 50-billion riyal ($13.3 billion) package to support private businesses and Egypt said it will allocate 100 billion pounds ($6.4 billion) to combat the virus. In Israel, the central bank will buy government bonds to moderate volatility.

While the moves should provide relief to small and mid-size enterprises, “what makes the current situation a bit more challenging is the simultaneous hit to both supply and demand,” said Taqi.

An overview of Middle East markets as of 4:30 p.m. in Dubai:

• Egypt’s EGX 30 lost 9.3%, the most in the region, with Commercial International Bank Egypt, Eastern Co. and Egypt Kuwait Holding losing more than 7.9%.
  • Index falls to the lowest level since Nov. 2016.
• U.A.E. lenders Emirates NBD PJSC and First abu Dhabi Bank PJSC retreat 10% and 3.7%, respectively
  • Abu Dhabi’s exchange announced it is closing trading halls in main offices, but will continue to provide trading via its digital platform.
  • Short selling is banned for the time being, U.A.E. Securities and Commodities Authority said on Sunday
• Saudi Arabia’s Tadawul All Share Index falls 1.1%, extending decline this month to 25%
  • Saudi Aramco retreats 1% after announcing a spending cut for this year.
• Kuwait’s main index dropped 6.5%. It’s down 30% this year.
• Israel’s TA-35 rose 2.8%, after earlier falling 1.1%. The yield on the country’s benchmark government bonds fell.

Governments across the region are stepping up efforts to contain the spread of coronavirus.

Saudi Arabia suspended all international flights for two weeks, while the U.A.E. temporally stopped issuing visas. Egypt shut schools for two weeks and Israel’s Benjamin Netanyahu ordered the closure of non-essential businesses and advised workers to stay away from offices. The country is planning additional aid for its economy, Finance Ministry Accountant General Rony Hizkiyahu said in a radio interview on Sunday.

“These stimulus packages are likely to ease some pressure on businesses,” said Edmond Christou, a financial-industry analyst with Bloomberg Intelligence. “However, that largely depends on the depth and persistence of the coronavirus spread, as well as banks’ appetite to deploy this liquidity into credit growth.”

Read more:

• Virus and U.A.E. Banks: Measures Hope to Push Banks to Aid SMEs
• G-20 Talks, Airport Crowds, Australia Restrictions: Virus Update
• Aramco Plans 2020 Spending Cut as Oil Plunges and Profit Slips
• Bank of Israel Adds Stimulus With First Bond Buying Since 2009
• By Pumping at Will, Saudi Hurts Oil Investment: Julian Lee

--With assistance from Yousef Gamal El-Din, Ivan Levingston, Mirette Magdy, James Amott and Abbas Al Lawati.

To contact the reporters on this story: Filipe Pacheco in Dubai at fpacheco4@bloomberg.net;Archana Narayanan in Dubai at anarayanan16@bloomberg.net;Nicolas Parasie in Dubai at nparasie1@bloomberg.net

To contact the editors responsible for this story: Celeste Perri at cperri@bloomberg.net, Claudia Maedler, Paul Wallace

©2020 Bloomberg L.P.