Weak input from Asian markets triggered a setback at Gulf Arab stock markets Tuesday, as Japan's benchmark index Nikkei fell to a 15-month low on worries that the world might face another recession and therefore a double-dip.
As a direct consequence, the U.S. dollar and oil prices weakened. This led to a near sellout at Saudi Arabia's energy price sensitive stock market Tadawul. Its lead index TASI dropped during the last trading hour and led to a dip of 1.45 percent and a close at 6,018.27 points.
Out of the 144 traded stocks, only bank SABB and insurer Allianz SF bucked the downtrend, with their shares closing up 0.47 percent at 42.8 Saudi riyals (11.41 dollars) and 0.23 percent higher at 21.75 Saudi riyals (5.8 dollars) respectively.
According to Swiss bank Credit Suisse, "at current prices oil is starting to look cheap."
"It will be important to see whether the market can find support at one of the next technical levels," the bank said in its daily analyst comment.
Weaker than oil related shares were Saudi insurers. Gulf General Cooperative Insurance Company posted the largest decline, ending 6 percent lower at 34 Saudi riyals (9.06 dollars).
The Dubai Financial Market (DMF) edged 0.45 percent lower at 1, 493.46 points. Real estate shares were once again the main losses, with construction specialist Arabtec losing 1.19 percent at 1.66 dirham (0.45 dollar). During the last three months, Arabtec lost 27 percent of its value.
On Tuesday, the DFM resumed trading of shares of Bahrain's Gulf Finance House (GFH). GFH shares have been suspended for two days after the Islamic investment bank failed to disclose its interim reviewed financial statements for the second quarter on time. It posted the largest loss as its share fell by almost 10 percent to 0.478 dirham (0.13 dollar).
Dubai Ports (DP) World lost 0.2 percent and closed at 0.499 dollar. Dubai-based investment bank EFG Hermes downgraded the world's fourth largest container port operator to "Neutral" from " Buy," saying DP World saw a strong rally in recent weeks by gaining more than 20 percent.
"It is therefore likely to pause for breath," EFG Hermes analyst Redwan Ahmed said. "We lower our 2010 and 2011 net income estimates by 12 percent and 16 percent, respectively, due to higher depreciation, tax and minority interest charges."
Nevertheless, Ahmed saw light at the end of the tunnel.
"We expect the volume growth momentum to accelerate in the second half of 2010 as DP World benefits from seasonal trade flows and new capacity expansion. Going forward, the third quarter 2010 trading update and news of DP World's London listing in 2011 should act as positive catalysts," he added.
Air Arabia from Sharjah, the United Arab Emirates (UAE), dipped by 0.88 percent and finished at 0.793 dirham (0.21 dollar). The low fare airline denied media reports that it has plans to buy "a rival carrier airline."
Media speculations emerged that three airliners, including Air Arabia, currently study the possibility to purchase Saudi competitor Sama Airlines. Sama grounded operations Tuesday after recording a loss of 266 million dollars.
In Abu Dhabi, the ADX General Index declined by 0.25 percent, closing at 2,502.93 points, due to losses in the energy and real estate sector.
According to EFG Hermes, at the UAE's two exchanges, the DFM and the ADX, foreign investors were net buyers.
The Qatar Exchange ended flat at 7,200.6 points. Market total value traded weakened 31 percent to 140.4 million Qatari riyals ( 38.57 million dollars) and volume 33 percent to 4.3 million shares.
The Bahrain Stock Exchange in Manama extended its step-by-step recovery as it ended 0.39 percent higher at 1,424.27 points, although Moody's Investor services downgraded Bahrain's sovereign rating.
Moody's said the Bahraini government's high oil price projection for its budget and negative outlook on the country's banking sector triggered the credit review of the smallest Gulf state.
The local and foreign currency ratings of Bahrain were lowered one notch to A3, which is the seventh highest investment grade rating, from A2.
In Kuwait, the KSE Market Index added 0.1 percent to 6,682.1 points. Kuwait Finance House (KFH), the second largest Islamic bank in relation to assets under management, was the most liquid share. KFH closed unchanged at 1.1 Kuwaiti dinar (3.81 dollars).