Saudi Stocks Lead Gulf Drop as Aramco IPO Confirmed

(Bloomberg) -- Saudi Arabian equities retreated the most in the Middle East, even after Crown Prince Mohammed bin Salman said the kingdom’s plan to overhaul its oil-dependent economy is on track. All other major stock gauges in the region also fell.

The Tadawul All Share Index rose briefly before slipping more than 1 percent, led by a decline in Saudi Basic Industries Corporation. The gauge’s 120-day correlation with Brent crude, which fell for a second day on Friday, is the highest since July 2017.

The Saudi crown prince said in an interview that the stalled plan to sell shares in oil giant Aramco will go ahead, promising an initial public offering by 2021 and sticking to his ambitious view the state-run company is worth $2 trillion or more.

Saudi Stocks Lead Gulf Drop as Aramco IPO Confirmed

The crown prince, facing U.S. pressure to tame surging oil prices, also said that the kingdom is fulfilling promises to make up for Iranian crude supplies lost to American sanctions.

“Investors would like to see more details regarding to what lead to the delay of Aramco’s IPO, to have a better understanding of what was the rationale behind the decision,” said Aarthi Chandrasekaran, vice president at Shuaa Capital in Dubai. “Economic concerns are still pressuring sentiment in general, and would be necessary to see more clarity on measures that could change that in the short term.”

  • MSCI Emerging Markets Index fell 4.5% last week, the biggest weekly drop since February, while a gauge of emerging-market currencies lost 0.8%
  • READ: Saudi Crown Prince Discusses Trump, Aramco, Arrests: Transcript
  • EM Review: Emerging-Market Bears Return as U.S. Yields Spike

MIDDLE EASTERN MARKETS:

  • The Tadawul All Share Index drops as much as 1.6%. Closed 1.3% lower
    • Saudi Basic Industries’ 1.6% loss is the biggest drag on the gauge, followed by Saudi Kayan Petrochemical’s 4.4% loss
    • Almarai falls a fifth day
      • Co. said that 4.9% decline in profit in 3Q was due to decrease in gross profit on higher cost of sales, primarily driven by higher alfalfa cost and an increase in labor costs
    • MORE: Standard Life Said in Talks With Saudis Over Seeding Local Funds
  • Qatar’s QE Index drops 0.6%, curbing YTD gain to 16%
    • Qatar Islamic Bank falls 1.1%; Qatar National Bank -0.6%
    • Advance in Qatari stocks this year is mostly driven by passive money tracking EM benchmarks after local companies increased foreign ownership limit, says Rami Sidani, the head of Middle East, North Africa portfolio management at Schroder Investment Management
      • “Fundamentally valuations are looking stretched at this level,” he told Bloomberg Television
    • MORE, on Oct. 04: Qatar Banks’ Outlook Raised by Moody’s as Nation Handles Embargo
  • Dubai’s DFM General Index, Abu Dhabi’s ADX General Index and Oman’s MSM30 Index lose between 0.1% and 0.3%
    • Drake & Scull climbs as much as 8.5% after shareholders voted in a meeting on Oct. 4 for the company to continue with its operations
      • Traders exchanged about 67m shares, more than twice its 30-day average
      • NOTE: The stock surged 15% last week amid bets that the shareholders meeting would have a positive outcome
    • GFH climbs 3% in Dubai after it said it received $1b offer for its real estate portfolio
  • Stocks in Kuwait and Bahrain lose 0.2% and 0.1%, respectively
    • MORE, on Oct. 5: Templeton’s Bahrain Bet Pays Off After $10 Billion Aid Deal
  • Israel’s TA-35 falls 0.3% as of 4:17pm in Tel Aviv. Nice retreats 2%, Tower Semiconductor retreats 4.2%
    • READ: Israel Antitrust Pushes More Food Imports, Cartel Crackdown
  • Egypt’s stock market is closed due to a local holiday

OTHER EMERGING MARKETS:

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