Stock markets in the oil-rich Gulf states plunged on Sunday over fears about the impact of the coronavirus, a market trend that also battered global bourses last week.
All of the six equity markets operating on Sunday in the Gulf Cooperation Council (GCC), which were closed the previous two days for the Muslim weekend, were hit as oil prices dropped below $50 a barrel. Qatar’s bourse was closed for a holiday.
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The Saudi bourse, the region’s largest and one of the world’s top ten equity markets, was down 3.6 percent an hour before the close.
But the region’s slide was led by the Kuwait Boursa, where the All-Share Index fell 10 percent, triggering its automatic closure. Kuwait’s bourse was closed for most of last week for national holidays.
The Dubai Financial Market dipped 4.5 percent while its sister market in Abu Dhabi was down 3.6 percent at the close of trading.
Bahrain’s bourse ended 3.4 percent down and the Muscat Securities Market in Oman finished down 1.2 percent.
“GCC equities witnessed a downfall as panic over coronavirus spread across the region,” M.R. Raghu, head of research at Kuwait Financial Centre (Markaz), told AFP.
“Initial expectations that the outbreak would be contained within China have proved elusive, as a large number of international cases continue to be reported,” he said.
At least 115 cases of the coronavirus have been reported by the Gulf states so far, with the majority of infections among people returning from pilgrimages to Iran.
– Global contagion –
Global stocks slumped on Friday, marking the largest weekly drop since the 2008 global financial crisis, as concerns grew that the spread of the virus could wreak havoc on the world economy.
Crude oil prices tumbled as well and analysts said central banks, led by the US Federal Reserve, might have to shift into crisis-resolution mode with urgent interest rate cuts.
All six GCC states — Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates — have taken measures to curb the spread of the virus, including cutting off transport links with Iran, where some 54 people are confirmed to have died.
Saudi Arabia also banned Muslim pilgrims from travelling to perform the “umrah” in the holy city of Mecca.
The move is likely to deprive the kingdom of billions of dollars in spending by millions of pilgrims and also creates uncertainty over the annual hajj pilgrimage scheduled for July.
Dubai, which boasts the most diverisfied economy in the Gulf, is hosting global trade fair Expo 2020 from October, with the hope of attracting around 25 million visitors.
Expo organisers said on Sunday they are working closely with the health authorities over the coronavirus and that the safety of people is of paramount importance.
“Expo does not open until October this year, and we will continue to follow the situation closely. We are hopeful that global efforts will succeed in managing the virus,” the organisers told AFP in an e-mail.
The health crisis threatens to further undercut Gulf economies, which are already battling a downturn and struggling to wean themselves from their decades-old energy addiction.
The Gulf states count China as their main trading partner and crude buyer, soaking up about a fifth of their oil.
But China’s energy demand has sagged as authorities lock down millions of people to prevent the spread of the virus, with major knock-on effects for a global economy that is dependent on a normally buoyant China.
The Gulf equities sell-off came as China reported a fresh spike in infections and after the US reported its first death from the virus.
Worldwide, nearly 3,000 people have been killed and about 87,000 infected since the virus was first detected late last year in the central Chinese city of Wuhan.
Matt Maley, an equity strategist at Miller Tabak & Co, said it was still too early to look at worst-case scenarios.
“That said, today’s markets are highly impacted by momentum-based mechanised trading. If things get going in one direction, it’s very hard to turn around,” he told Bloomberg News.
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