By Omar Hasan (AFP) – Aug 7, 2011
KUWAIT CITY — Stock markets in the energy-rich Gulf states and Israel dropped on Sunday as the historic US credit downgrading sent jitters across the region, with analysts expecting yet more losses.
"Markets have reacted negatively to the US downgrade which could be very serious for the Gulf states. I think the Gulf stocks will continue to dive in the coming days," said Hajjaj Bukhdur, head of a Kuwaiti investment company.
"This is because following the global financial crisis, Gulf sovereign wealth funds have invested more into the US treasury bonds. So the impact on the Gulf economies is real and serious," he told AFP.
Following the Muslim weekend, the Dubai Financial Market Index opened trading down 4.5 percent before clawing back some ground to end the day 3.69 percent weaker at 1,484.31 points.
Shares in property giant Emaar Properties shed 5.26 percent.
In neighbouring Abu Dhabi, the General Index closed down 2.53 percent at 2,603.22 points after opening in the red, with banks losing 3.30 percent and property shedding 5.61 percent.
The Saudi stock market regained its balance after being the first market globally hit by a sell-off when Standard & Poor's cut its credit rating for the United States from the top notch triple-A to AA+.
The Tadawul All-Shares Index closed with a 0.08 percent rise at 6,078.05 points after the largest Arab bourse shed 5.46 percent of its value on Saturday.
The Saudi market opens from Saturday to Wednesday, while other Gulf markets work from Sunday to Thursday.
"I believe it was more of a psychological effect from inflated media reports about the dire consequences of the downgrade. It was a panic sale," Kuwaiti economist Ali al-Nimesh said on Sunday.
"Tomorrow, the Gulf markets will be more stable and some of them are likely to recover part of today's losses," Nimesh told AFP.
The Kuwait Stock Exchange closed 1.61 percent down at 5,927.8 points, while the Qatar Exchange, which has overtaken Kuwait as the second largest Arab bourse, closed 2.51 percent down at 8,277.61 points.
The Bahrain Bourse closed 0.33 percent down at 1,276.86, while Oman's Muscat Securities market closed 2.08 percent down at 6,150.19.
Key Israeli stock indices fell around seven percent and trading on the Tel Aviv stock exchange was temporarily halted after shares slumped over the US credit rating downgrade, the bourse said.
According to its website, the benchmark TA-25 index closed down 6.99 percent at 1,074.274, while the TA-100 slid 7.20 percent to 972.80.
Trading opened as normal on Sunday, the first day of Israel's working week, but mandatory suspensions went into effect minutes into the session as the stock exchange plunged.
Sunday's session was the first on the Israeli bourse since S&P downgraded the US credit rating on Friday.
The announcement panicked international markets and was criticised by Washington as unjustified.
But S&P argued US leaders were becoming less able to get to grips with the country's huge fiscal deficit and debt load.
The agency also gave a negative outlook for the United States, saying there was a chance its rating could be cut again within two years if progress is not made to reduce the government budget gap.
Bukhdur and Nimesh both expected the Asian and European stocks to be in the red when they open on Monday, but also anticipated the losses to be much less than expected.
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