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Monday, March 02, 2020

Khaleej Times - Covid-19: GCC investors lose over Dh257 billion in a day as stock markets plunge

Khaleej Times - Covid-19: GCC investors lose...

Sell-off on the UAE and Gulf stock markets continued on Sunday due to heightened concern about the growing cases of coronavirus (covid-19) in the region while Kuwait suspended trading for the day after its index plunged 11 per cent.

The GCC investors lost more than $70 billion (Dh257 billion) on Sunday. Investors in Dubai and Abu Dhabi lost $6 billion and $8.3 billion, respectively. While the wealth of investors in Saudi Arabia fell $41 billion, $2.8 billion in Kuwait and $11.9 billion in Qatar as more cases of covid-19 were reported.

On Sunday, Dubai Financial Market lost 4.5 per cent, hitting 14-month low with almost all blue-chip stocks ending in the red. Emirates NBD Bank, the largest bank in Dubai, declined 6.8 per cent and Emaar Properties, the most actively traded stock on the bourse, decreased 5.1 per cent. Abu Dhabi Securities Exchange lost 3.6 per cent yesterday as it hit its biggest intraday fall since January 2016. First Abu Dhabi Bank dropped 3.9 per cent while telco Etisalat ended down 3.2 per cent.

Among other regional bourses, Saudi Arabia's Tadawul nosedives 3.7 per cent; Bahrain Bourse dropped 3.4 per cent; Muscat Securities Market fell 1.2 per cent, and Qatar Stock Exchange dipped 0.6 per cent.

Analysts expect that the equity markets in the GCC could witness further losses in the near-term as coronavirus continues spreading in more countries every day. They advised investors to avoid short-term view and take a strategic view of the markets.

The UAE and other Gulf countries are putting a restriction on the local events as well as restricting the movement of the people across the border in order to control coronavirus. On Friday, the World Health Organisation also raised coronavirus threat assessment to its highest level.

Equity investors in Dubai and Abu Dhabi last week lost over $4 billion last week. While Saudi Arabia's Tadawul index also declined by 2.6 per cent last week, losing over $80 billion.

Kuwait's bourse, which traded after a three-session break, plunged 11 per cent, its biggest-ever intraday fall. The exchange said it had suspended trading for the rest of the day due to the steep decline.

Zachary Cefaratti, CEO of Dalma Capital, said markets are continuing to correct in response to concerns regarding the economic impact of covid-19 containment measures, which will affect tourism and global trade most severely.

"Continued selloffs in risky assets, particularly those exposed to tourism, trade and China-linked supply chains can be expected as the impact of containment efforts and panic appear likely to be more damaging economically than the virus itself," Zachary said.

"With the virus now detected in at least 56 countries, companies are readjusting their profit expectations and economists are lowering their forecasts for global growth. Investor sentiment are extremely bearish for now. With tourism likely to get impacted further and oil prices down by over 15 per cent last week, UAE and GCC stock markets are likely to suffer further losses in the near term," said Vijay Valecha, chief investment officer at Century Financial.

In the current scenario, he said, another five per cent drop in global risk assets is likely to spook markets further with recovery post this likely to be dependent on central bank action and containment of cases outside China.

Kanchan Khemani, investment manager at Millennial Capital, advised that avoiding tactical short-term reactions and maintaining a strategic stance in equity positions until the COVID-19 panic subsides is key.

"As evident from market behaviour in the past week, investment, financial services and banking stocks remained resilient across the region. It would be our advice to diversify between 2-5 per cent of the investor portfolio to investments and financial services," Khemani said.

Monte Safieddine, market analyst at IG, said investors shifted from riskier assets to safe-haven products.

"Economic figures are set to get tested across the globe, and that's no exception for the region even as it attempts to diversify away from oil as the energy commodity's price suffers big declines," said Safieddine.

 Source: Khaleej Times