Gulf stocks likely to remain volatile as oil prices plunge

DUBAI (Agencies): Equity markets in the Gulf region are expected to remain volatile going forward as investor sentiment remains negative amid the spread of the coronavirus and as oil prices decline.

Dubai’s main index on Sunday fell 2 per cent, with most stocks in the red, while Abu Dhabi’s index dropped 3.6 per cent and Saudi Arabia’s closed 1.5 per cent lower. Analysts said that volatility is likely to continue in the short term as prices bottom out, but there may be opportunities for long term investors looking to buy the dip.

“Going forward, the market volatility might continue in global equities but the downside risk appears to be limited after declining by an average of 30 per cent since the start of 2020,” said Iyad Abu Hweij, managing director at Allied Investment Partners.

According to data from Bloomberg, Dubai’s index has plunged 35 per cent since the beginning of the year, while Abu Dhabi’s has dropped by 30 per cent. Saudi Arabia’s Tadawul index has lost 26 per cent since the start of 2020.

“Long term investors might access the current environment in analysing companies with strong fundamentals that are expected to benefit once the current environment has been stabilised,” Abu Hweij said.

Other analysts had earlier voiced similar opinions, saying that while the short term outlook remains bearish, stock valuations in the region are starting to look attractive for the long term, having shed lots of value already.

Adding to volatility and uncertainty in the Gulf are oil prices, which are now trading below $30 a barrel in a region where governments earn a bulk of their revenues from oil sales. This is in comparison to nearly $70 a barrel for Brent crude in January 2020.

Edward Bell, commodity analyst at Emirates NBD, said that oil prices will “continue to be pulled lower” as economic activity globally slows down.