Gulf Stocks Extend Global Equities Slump After G-7, Oil Decline

By Haris Anwar

Oct. 12 (Bloomberg) -- Persian Gulf stocks declined, extending a global slump, as investors speculated the Group of Seven's pledge to prevent the collapse of banks may not stem the credit crises and oil dropped to the lowest in a year.

Emaar Properties PJSC, the Middle East's largest real- estate developer, lost 10 percent after Citigroup Inc. cut its share-price estimate. Banque Saudi Fransi, the Saudi lender partly owned by Credit Agricole SA, and Bank Muscat SAOG, Oman's biggest bank, fell more than 7 percent amid concern that crude's decrease will slow economic growth in the region. Israel's TA-25 Index fell the most since 1997 after the opening of trading was delayed, while Egypt's CASE 30 Index also slid.

The Dubai Financial Market General Index led the retreat in the Gulf, tumbling 5.4 percent to 3,025.08. G-7 financial chiefs meeting in Washington refrained from unveiling new initiatives for thawing capital markets, even after the 30-stock Dow Jones Industrial Average and indexes in Europe and Asia had their worst weekly performances on record.

``Investors want to know how the G-7 countries will execute their strategy to restore investor confidence,'' Faisal Hasan, head of research at Global Investment House KSCC, said in a telephone interview from Kuwait. ``That's not clear from their message over the weekend. Oil is trading below $80, which is a source of concern for the region, especially at a time when the liquidity is drying up.''

Capping the Fall

The Dubai Financial Market capped daily stock declines at 10 percent today, according to a statement posted on the bourse's Web site, as the benchmark index extended its 2008 drop to 49 percent. The federal government of the United Arab Emirates also guaranteed all interbank lending between U.A.E.- based institutions and all deposits held by U.A.E. commercial banks, Emirates News Agency said, citing the cabinet.

The Tel Aviv Stock Exchange delayed the opening of trading by almost an hour today after the bourse was closed for a four- day holiday. Exchanges in Russia, Indonesia and Ukraine suspended trading last week in an effort to halt a rout that has wiped out about $28 trillion from global equities this year.

Israel's TA-25 Index fell as much as 8.7 percent, while Egypt's CASE 30 Index slid 3.1 percent at the close, according to the exchange's Web site.


The Abu Dhabi Securities Exchange General Index decreased 2.3 percent as Emirates Telecommunications Corp. sank to the lowest level since May 2007. Oman's Muscat Securities Market 30 Index lost 5.7 percent, while the Kuwait Stock Exchange Index fell 0.4 percent.

Rescue Package

In Qatar, the DSM 20 Index tumbled 7.2 percent and the Bahrain All Share Index decreased 0.8 percent.

Group of Seven finance chiefs on Oct. 10 refrained from specific fresh measures such as embracing a U.K. plan to guarantee loans between banks. European leaders will today devise their own rescue package with ``meat'' when they meet in Paris for a second summit in as many weekends, French Finance Minister Christine Lagarde said.

Comments from U.S. President George W. Bush and Italian Prime Minister Silvio Berlusconi last week did little to restore confidence in financial markets. In the past two weeks, central banks from Washington to Frankfurt have already executed emergency interest-rate cuts and pumped more cash into markets, the Federal Reserve said it would buy commercial paper, European governments bailed out banks and the U.K. and U.S. said they would start taking equity stakes in financial companies.

Saudi's Gain

Saudi Arabia's Tadawul All Share Index rose 0.3 percent after the kingdom reduced its benchmark repo rate by 0.5 percentage points and lowered the amount of money commercial banks have to hold as reserves to 10 percent from 13 percent, as it seeks to address liquidity shortages.

``The Saudi rate cut is a positive move and reassuring to investors that authorities are willing to take the preventive measures to stabilize the market,'' said Julian Bruce, Dubai- based director of institutional sales at EFG-Hermes Holding SAE, Egypt's largest investment bank.

Saudi Basic Industries Corp., the largest company in the Middle East by market value, rose 8.6 percent to 88.5 riyals.

Emaar lost 10 percent, the maximum allowed, to 5.13 dirhams. Citigroup cut the share-price estimate 29 percent to 15 dirhams on the stock. Emirates Telecommunications, the largest phone company in the U.A.E., sank 1.8 percent to 13.5 dirhams.

Valuations

Today's decline left Dubai's benchmark stock index valued at 7.4 times the earnings of its 29 companies, the lowest level since at least February 2007, data compiled by Bloomberg show. Abu Dhabi's index trades at 7.9 times profit. Both are cheaper than the MSCI Emerging Markets Index, which Oct. 10 was valued at 8.5 times profit after its biggest weekly slump on record.

Europe's Dow Jones Stoxx 600 Index, which also posted its largest weekly drop, trades at 8.5 times profit, the lowest level since at least 2002, data compiled by Bloomberg show. The Standard & Poor's 500 Index, the benchmark for American equities, is valued at 17.2 times earnings, the cheapest in more than a year, after its steepest weekly retreat since 1933.

Concern the deepening financial crisis will drive the global economy into a recession helped push crude oil down 10 percent to $77.70 a barrel in New York on Oct. 10.

Gulf states account for about 20 percent of the global oil supply. Oil revenue makes up 54 percent of Saudi Arabia's economy, and 39 percent of the U.A.E's gross domestic product, according to Bloomberg data.

Banque Saudi Fransi dropped for a second day, falling 9.6 percent to 47.9 riyals. Bank Muscat lost 7.6 percent to 0.955 rial.

Qatar National Bank SAQ, the Persian Gulf country's biggest bank, tumbled 4.2 percent to 141.6 riyals even after reporting an increase in third-quarter profit of 77 percent after income from lending surged.

To contact the reporter on this story: Haris Anwar in Dubai on Hanwar2@bloomberg.net