Saudi Stocks Decline Again as Oil Sinks Further: Inside EM

(Bloomberg) -- Saudi Arabia’s main stock index dropped for a third day, finishing below a mark it has held since December, as the coronavirus reduces demand for oil.

The Tadawul index fell 1.3%, the most among major gauges in the Middle East and below its 100-day moving average for the first time this year. State oil producer Saudi Aramco retreated as much as 1.8% during the session, but recovered near the close to finish higher.

Banking and materials stocks pressured the gauge after oil declined for a fifth straight week last week, with Russia yet to back Saudi Arabian calls for OPEC+ to cut production. Investors also reacted negatively to the U.S. Federal Reserve saying the virus posed a threat to global markets.

“Aramco has direct implications with Chinese oil demand, both in price and volume terms,” said Vrajesh Bhandari, the senior portfolio manager at Al Mal Capital in Dubai.

The shares have still performed well relative to crude prices, he said. While Brent has slumped 17% this year, Aramco is down 3.4%.

Saudi Stocks Decline Again as Oil Sinks Further: Inside EM

Saudi Arabia’s non-oil growth rate in the third quarter was the highest in five years and momentum continued in the fourth quarter, said Bloomberg Economic’s Ziad Daoud. Still, he said, “two headwinds could derail this recovery: public spending cuts, and a reduction to oil output in response to the spread of the coronavirus.”

Read a Saudi Insight: Two Headwinds to Recovery - Virus, Austerity

HIGHLIGHTS:
  • The MSCI EM stocks index gained 2.8% for the week ended Feb. 7, but lost 1% on Friday. An index tracking currencies from developing countries retreated 0.4% that day.
  • EM Review: Virus Jolts Stocks, Currencies as Outbreak Spreads
  • MORE: Goldman Revises Down Turkish Rate Path, Warns on Inflation, Lira

MIDDLE EASTERN MARKETS

  • The Tadawul All Share Index extended losses in the past three sessions to 2.3%
    • Decline on Sunday: Al Rajhi Bank -1.7%; Aramco -1.2%; Sabic -2.6%; National Commercial Bank -1.7%; Banque Saudi Fransi -2.4%
    • After trading during most part of the session in the negative territory, Aramco reversed losses in the final 30 minutes to rise 2%
    • “In the broader Saudi market, we are clearly seeing a shift into strong midcap ideas,” Al Mal Capital’s Bhandari says
      • He highlights flows into consumer, healthcare, insurance and industrial stocks at the expense of banks, petchems and telecoms, “the three heavyweight sectors”
  • Benchmarks in Dubai, Kuwait, Qatar, Oman and Israel fall as much as 0.8% as of 2:25pm in Tel Aviv, while those in Abu Dhabi, Bahrain and Egypt climb as much as 0.2%
  • Qatar National Bank rises 0.3% in Doha, trimming loss this year to 1%
    • The lender’s 2020 credit growth “is intact, with a loan book worth about 70% of Qatar’s estimated 2019 GDP after taking smaller banks’ share,” Bloomberg Intelligence analyst Edmond Christou writes in a note. “Yet, it needs a sustained private-sector shift.”
    • READ: QNB’s Strong Loan-Growth Trajectory Has Maturity Mismatch Focus
  • DXB Entertainments advances 5%, the most in Dubai, after posting positive adjusted EBITDA in 4Q; that compares to negative figures for the same period in the two previous years
  • Earnings in the region:
    • DFM Full Full Year Profit Misses Lowest Estimate
    • Emaar Malls Full Year Net Income 1.3% Below Estimates
    • DXB Entertainments Posts Another FY Loss; Sees Profit in 1Q, 4Q
    • United Intl Transport Full-Year Profit Meets Estimates
    • Ahli United Bank FY Profit $730.5m vs $697.5m

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