Regional sell-off as lifting of Iran sanctions adds to oil and China fears

The Dubai index bellwether Emaar Properties closed down 3.93 per cent at Dh4.40. Pawan Singh / The National

A sell-off across the region wiped billions from stock exchanges yesterday as investors reacted to weakening oil prices, the lifting of sanctions in Iran and market turmoil in China.

Shares in Doha led the retreat, plummeting 7.16 per cent to their lowest level since April 2013. Saudi Arabia’s headline index fell 5.44 per cent, closing at its lowest since March 2011.

Abu Dhabi officially entered a bear market as it dropped 4.24 per cent. It has lost almost a quarter of its value since July. Shares in Dubai ended 4.64 per cent lower.

“It’s a bloodbath,” said Sebastien Henin, the head of asset management at the Abu Dhabi-based investment firm The National Investor. “Bad news from China, the price of oil and the geopolitical situation has completely overshadowed market fundamentals. Valuations around the Middle East are very attractive right now, but it’s the same story across emerging markets as a whole.”

The Shanghai Composite also entered a bear market on Friday, closing 3.55 per cent lower on reports that local banks were no longer accepting shares as loan collateral.

Brent crude futures closed below $29 per barrel for the first time in 12 years on Friday, responding to the fresh sell-off in China and the return of Iran to the international oil market.

Lower oil prices provoked a sharp sell-off of global equities on Friday. The FTSE 100 closed off 2.1 per cent, while the S&P 500 lost 2.4 per cent.

Meanwhile the International Atomic Energy Agency yesterday confirmed that Iran had complied with the terms of a deal on its nuclear programme, struck in July, paving the way for the lifting of US and EU sanctions on the country.

Iran plans to increase its crude exports by 500,000 barrels per day, according to the state news agency Irna, threatening to put further pressure on crude oil prices.

Tehran’s stock exchange closed up 0.9 per cent yesterday, after rising 2.1 per cent on Saturday.

While Iran’s return to the international oil markets has been expected for some months, it comes at a difficult time for global markets, said Alexandre Andlauer, an oil and gas analyst at Alpha Value in Paris. “From a purely economic point of view it shouldn’t make much of an impact because it isn’t [unexpected] news, however it may stress slightly because of [current] market volatility,” he said.

Saudi Arabia’s oil minister Ali Al Naimi expressed confidence yesterday that “market forces, as well as the cooperation among the producing nations” would result in stability being restored to the market, but that such a process would take “some time”.

Arabtec and Dubai Investments were the biggest fallers on Dubai's index yesterday, each declining by 9.5 per cent.

The emirate's bellwether Emaar Properties closed down 3.93 per cent at Dh4.40.

Dana Gas was Abu Dhabi’s worst performing stock of the day yesterday, closing down 8.51 per cent at 43 fils, followed closely by FGB, which dropped 8.22 per cent to Dh10.05.

The UAE's earnings season kicks off in earnest today with the release of full-year results from Emirates NBD, with investors eager to gauge how lower oil prices have affected profit.

Mashreq, Emaar Malls and United Arab Bank are among the companies also expected to release results this week.

However Mr Henin said that even better-than-expected earnings are unlikely to bring back buying power to the market.

“Investors will look for sure at earnings, but it’s the macro factors like the price of oil and China’s economy that are the main drivers of market right now,” he said.

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