The global stock market rout deepened on Monday with most equities in Middle East markets slumping after sharp falls in Asia, caused by US President Donald Trump's tariff chaos and slumping oil prices.
Most equity markets in the Middle East extended losses after suffering their worst rout in five years on Sunday, amid fears of a global trade war and a sharp slowdown in the global economy as US and Beijing hunker down for a tariff showdown.
Saudi Arabia’s benchmark Tadawul Index, which fell more than 2 per cent during early trading, clawed back some of the losses and ended trade 1.05 per cent higher. It fell almost 7 per cent a day earlier. In the UAE, the Dubai Financial Market General Index closed down 3 per cent, while the Abu Dhabi Securities General Index was down 2.6 per cent.
Bourses in Kuwait and Bahrain also dropped 0.6 per cent and 1 per cent respectively, while the Qatar Stock Exchange also clawed back some lost ground and ended trade 0.4 per cent lower.
"Market response to the tariff announcement has been enormously negative as the individual country levels and baseline of 10 per cent were higher than seemingly many market participants had been expecting," said Edward Bell, acting group head of research and chief economist at Emirates NBD.
Energy stocks in particular took a beating, while shares of listed property companies as well as banks also tumbled.
chief economist, Abu Dhabi Commercial Bank
Saudi Aramco, the largest oil exporting company in the world, stemmed losses after falling by 4.75 per cent on Sunday and closed 1.3 per cent higher on Monday. However, Adnoc Gas in Abu Dhabi dropped by almost 5 per cent, while Aldar Properties, which fell almost 8 per cent during trading, recovered to close 1.6 per cent lower. Shares of Abu Dhabi Commercial Bank also recovered to close 1.9 per cent down.
Analysts say volatility would be the new normal in GCC markets, in line with the global risk market moment.
"In the case of Dubai stocks specifically, the overall volatility could be much higher than its peers because they were the consistent top performers over the last two-year period," Vijay Valecha, chief investment officer at Century Financial, said.
"The initial reaction across the GCC indices suggests that regional risk assets are likely to stay and mimic the movement of the developed market indices. For GCC indices, another headwind factor is the ongoing downfall in oil prices."
In Dubai, Emaar Properties, the biggest-listed developer in the emirate, closed down 2.5 per cent while Dubai Islamic Bank slumped by 5.7 per cent.
With oil trading below $70 per barrel level, "we are certainly sellers of petrochemicals and commodity stocks, having already started the year with an ‘underweight’ on both sectors", EFG Hermes analyst Mohamed Abu Basha wrote in a note.
However, "raising our heads beyond the short-term volatility/panic, we believe such a macro setting is relatively benign for emerging markets, particularly the Mena region’s oil-exporting economies" as they offer investors: "fundamental strong growth stories, driven by structural transformation" as well as strong balance sheets, good access to capital markets and pegged currencies.
"We favour fundamentally domestic-demand-driven sectors, led by property, financials, utilities and logistics," Mr Abu Basha said.
Slump in Asia
Asian shares also nosedived on Monday after Wall Street's meltdown on Friday after Mr Trump revealed his tariff agenda and Beijing's retaliation.
Tokyo’s Nikkei 225 index closed 7.83 per cent lower on Monday. South Korea's Kospi lost 5.57 per cent, while Australia’s S&P/ASX 200 tumbled 4.23 per cent.
Hong Kong's Hang Seng index dropped by 13.55 per cent, while China's Shanghai Composite Index fell 7.34 per cent.
Monica Malik, chief economist at Abu Dhabi Commercial Bank, said the fall in markets reflects fears that a global trade war could lead to recession, alongside the fall in the oil price.
"China’s counter measures further add to the concerns, though we believe that it could reflect a negotiation tactic,” Ms Malik said. “We expect significant volatility in the coming weeks, given the time for countries to negotiate new trade deals with the US.”
Mr Trump unveiled his most wide-ranging tariff policies last week, targeting all trading partners of the US with a minimum 10 per cent tariff and much higher rates for countries that the US claims to place high tariffs on US imports. Among the major trading partners hit with new higher tariff rates include China at 34 per cent, the EU at 20 per cent, India at 26 per cent, Japan at 24 per cent and South Korea at 25 per cent.
Many smaller, emerging economies have been hit with much higher tariff rates on the US government’s claim that they charge near 100 per cent tariffs on imports of US goods. China has already retaliated with its own 34 per cent tariff on imports from the US, while other trading partners are considering their responses to the US’s major disruption to global trade. Beijing plans to impose tariffs starting April 10.
The baseline 10 per cent rate took effect on April 5, while the higher individual levels will be implemented on April 9.
The six-nation GCC bloc – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE – along with Middle East and North Africa nations Egypt, Iran, Lebanon, Morocco and Yemen, all received the minimum 10 per cent tariff.
Syria was the hardest hit at 41 per cent, followed by Iraq (39 per cent), Libya (31 per cent), Algeria (30 per cent), Tunisia (28 per cent) and Jordan (20 per cent).
US futures
US futures also signalled further weakness. The futures for the S&P 500 lost 3.47 per cent while that for the Dow Jones Industrial Average dropped 3.05 per cent. The futures for Nasdaq lost 3.76 per cent.
The US dollar weakened against the yen and euro, as the market turmoil continues.
The Dow Jones index dropped 8 per cent last week, the US dollar index fell 1 per cent and 10-year US Treasury yields fell 25 basis points as markets price in a greater chance of a US recession.
Markets have increased their rate cut expectations to four 25bps cuts by the end of the year even amid the inflationary risks the tariffs pose.
