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Saudi resumes freefall on oil, Egypt also slides

Saudi Arabia’s stock market fell to its lowest level this year in early trade on Thursday after oil prices tumbled again

Published: Updated:

Saudi Arabia’s stock market fell to its lowest level this year in early trade on Thursday after oil prices tumbled again, while Egypt's bourse was also weak.

The main Saudi equities index dropped 2.9 percent to 7,762 points, falling below its January low of 7,770 points and extending its loss this month to 14.6 percent.

Nearly all stocks were in the red, indicating a broad and indiscriminate sell-off. Petrochemicals giant Saudi Basic Industries dropped 4.5 percent to 85.50 riyals despite carrying for the last trading day a dividend of 5.5 riyals that will be paid on Sept. 2.

U.S. crude slumped over 4 percent on Wednesday, hitting a fresh 6-1/2 year low, on news of an unexpected stockpile build in the United States. The Brent crude benchmark dropped 3.4 percent on Wednesday.

Both U.S. oil and Brent have slipped further on Thursday and Chinese equities dropped again, reinforcing concerns about the state of China's economy, one of the biggest oil consumers in the world.

Egypt’s stock index fell 0.8 percent and Ezz Steel fell 1.2 percent after the company said its first-quarter loss had widened to 136 million Egyptian pounds ($17.4 million) from 19 million pounds a year earlier.

Ezz said it had to reduce output after being unable to secure enough raw materials because of foreign currency shortages in the country.

Heavyweight Commercial International Bank (CIB) fell 1.5 percent after Egypt's Pharos Securities said the stock was still not cheap enough to go overweight on it.

“We believe a tactical underweight is the preferred course of action in the short term, given what seems to be an upcoming perfect storm for emerging markets and given that the bank trades only 6.9 percent below our fair value estimate,” it said in a note.

“This perfect storm, which could be triggered by a rate hike in the U.S. in September, significantly raises the risk of a steep Egyptian pound devaluation versus the dollar in the very short term, which may deter foreign investors from building aggressive long positions in Egyptian equities in general and CIB in specific.”