It has been a tumultuous week for Middle East stock markets as shockwaves spread from Saudi Arabia’s anti-corruption crackdown and the kingdom’s tensions with Iran. As the dust settles in the region, some analysts can see buying opportunities.

Benchmark indexes from Dubai to Abu Dhabi and Kuwait ran up losses after the weekend purge in Saudi Arabia and as officials in Tehran and Riyadh traded barbs. Some stocks linked to prominent figures entangled in the Saudi investigation slumped by more than 20 percent. Companies in neighboring markets regarded as proxies for the region retreated as investors became wary of risks. The combined value of bourses in the six-nation Gulf Cooperation Council fell to $900 billion, the lowest level in a year, according to data compiled by Bloomberg.

“The selloff in the market is definitely not due to a deterioration in fundamentals,” said Issam Kassabieh, equities analyst at Menacorp Financial Services in Dubai. “It is mostly due to the Saudi tension. Everything here is pending on Saudi and the clarifications they are expected to bring. It’s a guessing game right now, and recovery could come once things are clear.”

On Thursday, every stock benchmark in the region rose. Here’s an account of how some assets responded to events in Saudi Arabia, and what could happen next:

Dubai’s Emaar

Shares in Emaar Properties PJSC, the real estate company that built the iconic Burj Khalifa, fell 6.1 percent in the week, contributing the most to losses in Dubai’s benchmark. Investors treat the share as a proxy for the U.A.E. and this week’s events came days before applications close for an initial public offering Emaar plans for 20 percent of its development unit.

Emaar stock should recover once sentiment starts picking up and the IPO shouldn’t be affected, said Majd Dola, senior research analyst at Al Ramz Capital in Dubai.

Stocks in Saudi Arabia

Kingdom Holding Co., whose billionaire main shareholder Prince Alwaleed Bin Talal was among those detained Nov. 4, lost almost 20 percent of its value, posting its worst weekly performance since January 2016. Al Tayyar Travel Group Holding Co., whose founder and non-executive board member Nasser Al Tayyar was also held, also slumped by almost one fifth. Shares in Red Sea International Co., whose chairman is caught up in the crackdown, dropped 10 percent.

Al Tayyar Travel Group now presents “an attractive entry point,” said Ahmed Soliman, an equity analyst at CI Capital, who raised his recommendation on the stock to overweight from neutral on Thursday. “Although uncertainty still clouds the scene, we believe that at this stage the move is linked to Nasser Al Tayyar in a personal capacity, not a professional one.”

Kingdom Holding Chief Executive Officer Talal Al Maiman said in a message on the company’s website that the Saudi government is “in full confidence” with the firm. The country’s regulator has said that it has frozen only the bank accounts of individuals and not those of the companies they own or manage.

Al Tayyar Travel Group said in a statement it is aware of reports of the arrest of Nasser Al Tayyar, adding that the company is committed to respecting regulations. Red Sea International said Wednesday it knows of the reports about its chairman, without being more specific.

Losses in Qatar, Kuwait

For Qatari shares, increased perceptions of risk toward the broader region could hardly come at a less favorable time. The index fell 3.2 percent this week, extending its loss this year to 26 percent, the worst performance globally. The benchmark is already in a slump that started in June, when a group of neighbors led by Saudi Arabia cut ties with the country alleging it supports terrorist groups, an accusation Qatar has denied.

Kuwait’s main benchmark fell 4.4 percent, it’s worst weekly performance since January 2016. The gauge remains the region’s star performer for 2017 since a rally in the first quarter boosted bets it would be included in FTSE Russell’s emerging-market list.

Etihad Debt

Bonds issued by Abu Dhabi carrier Etihad Airways PJSC declined the most among corporate and sovereign notes across the GCC, according to data compiled by Bloomberg. The airline was already suffering from failed bets on Alitalia SpA and Air Berlin Plc and soaring losses from its own operations before the Saudi crackdown.

Meanwhile, in Riyadh...

The Tadawul All Share Index, Saudi Arabia’s main stock gauge, fell less than 0.1 percent in the week, outperforming most regional benchmarks. Caught in the eye of the storm, the gauge displayed a similar pattern during sessions throughout the week: shares dropped in early trade, but recovered by the close. The Public Investment Fund, the Saudi sovereign wealth fund, could be supporting the market, some tracking trading in Riyadh have said this week. A spokesman for the PIF didn’t respond to requests for comment.

Source:
courtesy of BLOOMBERG

by Filipe Pacheco

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