Dubai stocks dropped the most since October 2008 and equity markets across the oil-producing Gulf Cooperation Council tumbled after OPEC reduced its estimate for crude demand in 2015.
The DFM General Index (DFMGI) slumped 7.4 percent to the weakest since Jan. 15 at the close. In neighboring Abu Dhabi, home to almost 6 percent of the world’s proven oil reserves, the ADX General Index fell 4.7 percent, the most since November 2009. Oman’s MSM 30 Index lost 4.2 percent, becoming the fourth GCC gauge to enter a bear market in two weeks. Qatar’s QE Index slid 4.3 percent and Saudi Arabia’s Tadawul All Share Index retreated 0.2 percent.
Equity markets worldwide tumbled after the 12-member Organization of Petroleum Exporting Countries yesterday cut its forecast for demand next year to the lowest level in 12 years, raising concern over the strength of the global economy and leaving investors contemplating when oil’s plunge will reach a bottom. Brent Crude fell below $65 a barrel for the first time since 2009.
“The problem at the moment is that no one can establish where the oil price is going to finally end up,” Gary Dugan, chief investment officer at National Bank of Abu Dhabi PJSC, said by telephone. “Everyone kept waiting for the oil price rebound, but it hasn’t come.”
Kuwait’s SE Price Index lost 1.5 percent and Bahrain’s measure fell 0.9 percent.
Global Selloff
Oman’s decline brought its drop since a peak in September to 23 percent. Saudi Arabia’s Tadawul entered a bear market on Nov. 30, and Dubai’s benchmark measure followed on Dec. 8. Kuwait’s SE Price Index also entered a bear market this month.
In Abu Dhabi, First Gulf Bank PJSC decreased 5.9 percent to 16 dirhams, the lowest since July. Aldar Properties PJSC slid 10 percent, the most since September 2005, to 2.52 dirhams, the lowest in a year. Dubai’s Emaar Properties PJSC (EMAAR), the real estate developer that accounts for almost 18 percent of the emirate’s gauge, slumped 9.1 percent to 7.23 dirhams, the lowest level since February.
“There’s a real worry if oil drops to $50 it would have a painful impact on governments’ budgets,” Wadah Al Taha, chief investment officer of Dubai-based Al Zarooni Group, said by phone. “Governments may slow or halt projects deemed less important and the private sector may retrench, causing development and construction activity to slow.”
OPEC’s forecast led to a global selloff in stocks yesterday, sending the MSCI All-Country World Index and the Standard & Poor’s 500 Index to their biggest drop in two months.
“We are highly correlated at least psychologically with the international markets,” Al Taha said. “We will probably head down further in the next few sessions.”
