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Weak oil prompts heavy selling on Middle East bourses

Fuelling the selloff in Middle East share markets were comments by Saudi Arabia reiterating that it would make no output cuts to prop up prices

Published: Updated:

Emerging market stocks were sold off on Thursday, with Middle East bourses battered after oil prices plunged the previous day and the Saudi oil minister shrugged off suggestions the country might cut output to shore up prices.

Shares in Dubai were down more than 7 percent at one point on Thursday, wiping out almost all the year’s gains, while stocks in Saudi Arabia lost 2.1 percent and Abu Dhabi’s share index fell more than 4 percent.

“We have seen the price of the region’s key export fall by 40 percent - this is a perfectly reasonable reaction in stock markets,” said Neal Shearing, head of emerging market research at Capital Economics.

“We don’t think that the fall in oil prices is leading to a collapse in growth in the Middle East, or in the Gulf economies, but we do think it is going to lead to a period of softer growth.”

Oil prices tumbled as much as 5 percent on Wednesday to five-year lows, and though they stabilized on Thursday they remained below $65 a barrel.

Fuelling the selloff in Middle East share markets were comments by Saudi Arabia’s oil minister reiterating that the world’s biggest oil exporter would make no output cuts to prop up prices.

Elsewhere, the rouble hit a new historic low against the dollar, although expectations the Russian central bank will raise rates sharply at a policy meeting later on Thursday kept losses in check.

The rouble has slumped almost 40 percent since June on falling oil prices, an economic slowdown and Western sanctions over the Ukraine crisis that have restricted Russian firms' access to international capital.

South Africa’s rand traded sideways against the dollar after falling to fresh six-year lows the day before, with the market bracing for a downgrade when Fitch and Standard & Poor’s review the country’s credit rating on Friday.

In broader markets, the MSCI emerging stocks index was down 0.7 percent to levels last seen in March, following falls in Asia and a sell-off on Wall Street on Wednesday.

Asian energy shares weighed heavily on the region's bourses.

In Kuala Lumpur, shares of Petronas Dagangan and Petronas Gas each dropped about 4 percent, with Malaysia’s key stock index edging down 0.5 percent after a 1.6 percent rise on Wednesday.