MIDEAST STOCKS-Risk appetite sags ahead of earnings season; oil gloom
Mid-East stocks - Reuters

Dubai, United Arab Emirates: Middle East bourses seem set to extend declines on Monday as downbeat global stock markets and a renewed slump in oil prices further dent risk appetite in the crude-exporting region.

Brent future contracts was down 2.3 percent in Asian trade at $32.76 as of 0545 GMT as China’s economic slowdown dented the outlook for demand and traders placed record bets on even lower prices.

Asian stocks were also weak, with the Shanghai Composite Index falling around 1 percent in erratic early trade. MSCI’s broadest index of Asia-Pacific shares outside Japan sank 2 percent.

Saudi Arabia’s index, which lost 9.9 percent last week as oil prices slid, fell a further 2.2 percent to 6,091 points on Sunday, its lowest close since November 2011.

The petrochemical sector managed a slight recovery, rising 0.7 percent to trim its 2016 declines to 12.7 percent. Government moves to hike fuel, gas and electricity costs have heightened investor worries about profitability in the sector, which is closely tied to oil.

Petrochemical stocks’ slump has left them at attractive valuations versus the broader market average, said Santhosh Balakrishan, research analyst at Saudi’s Riyad Capital.

The impact of reduced energy subsidies on producers’ gross margins are now fully factored into petrochemical stock prices, he added.

Investors are now switching their focus to fourth-quarter results to gauge the impact of lower oil prices and slowing economic growth on the bottom line of various industries.

Shares in Almarai fell 10 percent on Sunday after the kingdom’s largest dairy producer said utility price hikes would add around 300 million riyals ($79.94 million) to its costs in 2016 and it could face further selling from disgruntled investors.

Analysts polled by Reuters on average forecast Almarai to make a fourth-quarter profit of 480.2 million riyals, up 12.2 percent year-on-year.

Egypt’s bourse, which fell 2.0 percent to 6,782 points on Sunday. It will likely remain between support and resistance levels of 6,750 and 7,100 points, Beltone Financial wrote in a note. ($1 = 3.7530 riyals)

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