Gulf Shares Fall on Concern That Earnings May Lag Expectations

By Arif Sharif

Jan. 18 (Bloomberg) -- Persian Gulf shares declined on forecasts that Saudi Basic Industries Corp.’s profit will drop, stoking concern that corporate earnings in the region may be lower than expected.

Saudi Basic, the region’s biggest publicly traded company known as Sabic, dropped for a fourth day. Savola Al Azizia United Co., Saudi Arabia’s biggest food producer, fell to the lowest intra-day level in almost two months. Emaar Properties PJSC also retreated.

Saudi Arabia’s Tadawul index declined 1.4 percent to 4,636.04 at 11:36 a.m. local time, bringing the five-day slump to 10 percent. The Dubai Financial Market General Index dropped 4.8 percent and the Abu Dhabi Securities Exchange General Index retreated 3 percent. Qatar’s Doha Securities Market Index fell 3.3 percent.

“The consensus on Sabic’s numbers is a possible indication of weaker-than-expected fourth-quarter earnings across the region, which is why the markets are under pressure,” Mohammed Galal, head of foreign institutional sales at Al Futtaim HC Securities, said in a phone interview today. “The local sentiment is negative, there is a lack of foreign investment, oil prices are falling and the global markets are weak,” he added.

Sabic, the world’s largest petrochemicals maker, fell 4.9 percent to 44.8 riyals, bringing the four-day drop to 20 percent.

The company may report its steepest decline in quarterly profit since 2002 after the global financial crisis and a slumping auto industry reduced demand for plastics and chemicals, according to the average estimate of four analysts surveyed by Bloomberg. Fourth-quarter net income probably fell 31 percent to 4.74 billion riyals ($1.1 billion), according to the survey.

Oil’s Drop

Crude oil futures in New York closed at $36.51 a barrel on Jan. 16, down 11 percent for the week. Prices have tumbled 60 percent from a year ago. U.S. stocks fell for a second week, led by financial companies, after Citigroup Inc. said it will split in two and Bank of America Corp. required emergency federal funds for its acquisition of Merrill Lynch & Co. European stocks also slid last week.

Savola lost 10 percent to 20.7 riyals and is poised for its lowest close since Nov. 24. The company reported a loss of 464 million riyals ($124 million) in the fourth quarter, compared with a profit of 177 million riyals in the year-earlier period.

Emaar, the United Arab Emirates’ biggest real-estate developer, fell 2.3 percent to 2.12 dirhams.

Industries Qatar, the region’s second-biggest petrochemicals company, retreated 2.8 percent to 73.4 riyals.

The Kuwait Stock Exchange Index declined 1.4 percent and the Bahrain All Share Index dropped 0.2 percent. Oman’s market was closed today.

To contact the reporter on this story: Arif Sharif in Dubai at asharif2@bloomberg.net