Saudi Arabian stocks tumbled entering a so-called death cross
Saudi Stocks Sink Into Death Cross as IMF Sees Growth Slowing
Saudi Arabian stocks tumbled, entering a so-called death cross, after the International Monetary Fund said the drop in oil prices may force spending cuts and curtail the kingdom’s economic expansion. Dubai’s shares also slumped.
The Tadawul All Share Index slid 3.9 percent, the most in five months, to 8,105.33 as of 2:11 p.m. in Riyadh, dragging its 50-day moving average below its 200-day moving average, a signal to some investors that further declines are in store. Al Rajhi Bank’s 2.7 percent decrease was the biggest contributer to the measure’s decline, which is headed for the longest losing streak in almost two months. Dubai’s DFM General Index slipped 2.5 percent to the lowest close since April 13.
The Tadawul’s drop comes two months after Saudi Arabia opened its stock market to direct foreign investment for the first time to help diversify its economy away from oil. It puts into focus the deepening concern that King Salman is pushing ahead with a multi-billion dollar spending program at a time when crude, which accounts for 90 percent of government revenue, is trading near the lowest in six years.
“Investors in Saudi Arabia are skittish these days and they may take a negative cue from anything,” Ibrahim Masood, a money manager who helps oversee about $400 million at Aventicum Capital Management Qatar, said by phone from Doha Tuesday before the market opened. Masood focuses his investments on consumer and health-care insurance companies that are typically more resilient to slowing growth. “The IMF report is as good a reason as any for them to sell down,” he said.
Saudi Economy
Growth in OPEC’s biggest exporter will slow to 2.8 percent this year and 2.4 percent in 2016 after oil prices slumped, the Washington-based IMF said. If spending isn’t curbed, its fiscal deficit would be “very large” this year and over the medium term, it added.
Brent crude, the benchmark grade against which Saudi exports are priced, retreated more than 50 percent in the past 12 months to $48.50 per barrel on Tuesday. Tadawul is down 24 percent over that period.
“Weak economic data out of Japan and China is not helping as it could indicate decline in oil demand going forward,” Muhammad Faisal Potrik, the head of research at Riyad Capital, said Tuesday from the kingdom’s capital.
Regional Drop
Equity indexes across the six-nation Gulf Cooperation Council, where most governments rely on oil revenue to fund their spending, also declined. Abu Dhabi’s ADX General Index fell 2 percent, Qatar’s QE Index lost 0.6 percent and the Bloomberg GCC 200 Index, which tracks 200 equities across the region, is headed to the lowest since Jan. 6.
“Weaker oil for the region potentially impacts government spend” including deposit growth with the banks, Ali Khan, the chief executive officer of London-based BGR Asset Management LLP, said by e-mail. He is no longer exposed to Saudi Arabian stocks and is cautious about investing in U.A.E. markets.
In Egypt, where the government has relied on financial aid from the Gulf since the 2011 Arab Spring, the EGX 30 Index fell 2.1 percent to a four-month low.
Source: Bloomberg – Saudi Stocks Sink Into Death Cross as IMF Sees Growth Slowing
