Saudi petchems lead Gulf lower on oil price tumble

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DUBAI (Reuters) – Saudi Arabia’s stock market led Gulf bourses lower early on Sunday after oil prices plunged nearly 8 percent at the end of last week because of intensifying fears of a supply glut.

The slide of the Brent oil <LCOc1> price from $85 a barrel at the start of October to below $65 has wiped $130 billion or 9 percent of gross domestic product off the Gulf’s oil export revenues on an annualised basis, London-based Capital Economics estimated last week.

That may do little direct damage to Gulf economies; fiscal reforms in the last few years mean most governments will remain able to spend more on economic growth next year, and do not face balance of payments crises.

Nevertheless, with Brent oil <LCOc1> now at $58.80, governments may become more cautious about spending and could resort to borrowing more, pressuring liquidity in banking systems. Private sector businessmen may become less willing to invest for the long term.

The Saudi stock index <.TASI> sank 1.1 percent in the first hour as all 14 petrochemical stocks dropped, with the biggest, Saudi Basic Industries <2010.SE>, losing 1.7 percent.

Eleven of 12 banking stocks also fell, the exception being Saudi British Bank <1060.SE>, which rose 0.6 percent.

Anaam Holding <4061.SE> surged a further 8.8 percent in heavy trade after jumping its 10 percent limit on Thursday after it signed a non-binding memorandum of understanding to buy real estate and commercial assets owned by Abdullah Abbar & Sons Cold Stores and Dar Al Abbar Co.

In addition to falling oil prices, the Saudi market has been dampened in the last few weeks by concern that the country’s ties to the West could be damaged by the international furore over the killing of dissident Jamal Khashoggi.

Other Gulf markets fell more modestly on Sunday morning, with Dubai <.DFMGI> losing 0.3 percent. Union Properties <UPRO.DU>, the most active stock, slid 1.5 percent.

Abu Dhabi’s index <.ADI> fell 0.5 percent as Abu Dhabi Commercial Bank <ADCB.AD> slipped 2.6 percent, while Qatar’s index <.QSI> dropped 0.3 percent as petrochemical producer Industries Qatar <IQCD.QA> retreated 1.1 percent.

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