Middle East stocks tumble as Iran prepares to enter oil war

January 18, 2016, 5:05am


Stock market employees work at Tehran's Stock Exchange in Tehran, Iran, on Sunday. Stocks across the Middle East tumbled on Sunday. Picture: REUTERS/RAHEB HOMAVANDI on Business Day Live

Bloomberg on Business Day Live

DUBAI — Stocks across the Middle East tumbled on Sunday as the easing of sanctions against Iran raised the prospect of a surge in oil supplies to a market already reeling from the lowest prices in more than a decade. Shares in Tehran gained.

Saudi Arabia’s Tadawul All Share Index dropped 5.4% to its lowest level since March 2011. Abu Dhabi’s ADX General Index fell into a so-called bear market.The Bloomberg GCC 200 Index, which tracks 200 of thesix-nation Gulf Co-operation Council’s (GCC’s) biggest companies, traded at 9.5 times estimated 12- month earnings, the lowest in almost seven years.

Iran, home to almost 10% of the world’s proven oil reserves, is starting preparations to boost exports after the United Nation’s nuclear agency on Saturday said the country has complied with the terms of an international agreement to curb its nuclear programme. That threatens to put further pressure on prices, hurting the oil-dependent economies of the GCC.

"Iranian oil supply will come to the market as early as today or tomorrow," said Nayal Khan, the Riyadh-based head of institutional equities sales trading at Saudi Fransi Capital. "The market’s recovery will depend on whether we can get oil back above $30."

Iran is targeting an immediate increase in shipments of 500,000 barrels a day, Amir Hossein Zamaninia, deputy oil minister for commerce and international affairs, said on Sunday. It plans to add another half million barrels within months.

Concern that Iran may exacerbate the global supply glut sentBrent crude, a benchmark grade for more than half the world’s oil, to a new 12-year low on Friday, helping to spur a global stock rout. The Standard & Poor’s 500 Index fell to the weakest level since Aug. 25 in the worst start to a year for US equities on record. Emerging-market stocks posted a third straight weekly decline, dropping to the lowest level since 2009.

The countries of the GCC account for about 30% of the world’s proven oil reserves.

The Saudi gauge has tumbled 35% over the past year as the slump in oil has hurt company profits linked togovernment spending.Oil revenue accounts for more than 70% of the kingdom’s income.

Saudi Arabian Fertilizer retreated 6.2% to the lowest level since November 2009. Yanbu National Petrochemical slumped 5.9% to the lowest level since May 2009. The company’s fourth-quarter profit dropped 36%.

"Most companies are likely to report results this week and this can certainly influence short term direction,"said Muhammad Faisal Potrik, the head of research at Riyad Capital. "However, if we look at dividend yields and expectations of oil prices one year out, some of the stocks are very attractively priced and long-term investors are unlikely to suffer losses if they start investing here."

"Oil breaking below $29 oil price has urged more investors to sell," said Talal Touqan, the head of research at Abu Dhabi- based Al Ramz Securities.

Qatar’s QE Index tumbled 7.2%, the most since December 2009, and Abu Dhabi’s ADX General Index slumped 4.2% to the lowest level since November 2013. It has declined 23% since a peak in July.Dubai’s DFM General Index lost 4.6% in the highest trading volume this year.

Oman’s MSM 30 Index fell 3.2%, the most since December 2014, and Kuwaiti stocks also lost 3.2% to the lowest level since May 2004. Bahraini equities slipped 0.4%.

While Saudi Oil Minister Ali al-Naimi is optimistic that market stability will return, it will take time, he said at a news conference in Riyadh on Sunday.

Iranian shares rose to the highest level since August, according to data on its website. The nation is seeking to attract at least $30bn in foreign direct investment over the next five years, President Hassan Rouhani said in a televised speech.

"Investors shouldn’t look at Iran to make a quick buck but rather invest with a long-term view to benefit from the best- performing market of the next five years," Ramin Rabii, the chief executive officer of Turquoise Partners, aTehran-based investment company, said on Saturday. "We expect the Iranian economy to grow at a rate of 6 to 8% for several years."

Revenue from oil will act as a "supplementary income" for the country, Rouhani said.

Egyptian equities extended losses after its worst week since the Arab Spring. The EGX 30 Index fell 1.7% to the lowest level since October 2013.

Bloomberg