Gulf Arab markets slump as Mideast unrest spreads

Gulf Arab markets slid on Sunday as unrest spread across the world's top oil exporting region and more selling is expected as investors cut their exposure despite a buoyant economic outlook for the Gulf.

"These are retail driven markets and retail investors put sentiment over science," said Haissam Arabi, chief executive and fund manager at Gulfmena Alternative Investments.

"Even though fundamentals are good, they would rather preserve their cash at this point. Political instability is getting priced in and I expect further selling pressure unless we see some clear, positive developments."

Kuwait's index slumped to a seven-month low, Qatar fell to its lowest close since early December and the Oman, Abu Dhabi and Dubai benchmarks saw their largest declines in three weeks. Dubai fell 3.7%. Saudi Arabia slid 0.8% to a three-week low.

Thousands of Bahraini protesters have set up a tent city in a Manama square that has come to symbolise their cause. Many are starting to call Pearl Square "Martyrs' Circle", in memory of the four people killed in Thursday's night-time raid by riot police to clear the area.

"Investors are little more on edge - the whole story that this unrest was just about Egypt or North Africa, has taken a serious hit," said Akram Annous, MENA strategist at Al Mal Capital. "Bahrain is a concern from an equity standpoint.

"There is now pretty clear geopolitical unrest in a GCC (Gulf Cooperation Council) nation. How this is resolved will impact equity markets directly."

Bahrain's protests come as unrest wracks other Middle East and North Africa countries, including Yemen and Libya, while popular revolt has forced long-standing rulers in Egypt and Tunisia from office, raising political risk premiums.

This is in contrast to bullish growth estimates. Qatar's economy is forecast to expand 12.8% in 2011, while the GDP of the five other GCC members are all expected to rise by more than 3.5%.

"Financial news is secondary to political news right now," said a Dubai-based regional trader who asked not to be identified. "Foreigners are fleeing from anything related to the region."

Zain rejects Saudi bids, shares fall

Kuwait's Zain fell 7.3%, its biggest drop in eight months after the telecoms operator rejected bids for a quarter-stake in its Saudi unit, putting Etisalat's USD 12 billion takeover of Zain in doubt.

Zain Saudi fell 2.6% to a three-week low, while bidder Kingdom Holding dropped 3.3%.

"The rejection of the Zain Saudi offers increases uncertainty, hence the nervousness among investors and Zain's share price falling," said Irfan Ellam, vice president, and Al Mal Capital telecoms analyst. "Zain needs to find a buyer for its Zain Saudi stake and due diligence will take time."

Zain shareholder, the Kharafi group, is leading Zain's sale and Kharafi firms tumble. National Investments Co dropped 6.3% and National Industries Group fell 7.9%.

Kuwait banks also slid, with Zain shares widely used by investors as collateral.

National Bank of Kuwait and Burgan Bank lost 4.4% and 3.8% respectively.

Kuwait's index fell 2.5% to its lowest finish since July 6 and biggest drop since May 25.

Dubai's Union Properties plunged 6.3% to a new all-time low, extending declines since its fourth-quarter loss increased five-fold.