DUBAI: Saudi Arabia's share index hit a 10-week low and most other Gulf Arab bourses declined on Monday as slumping oil prices and a gloomy start to the week on world markets weighed on regional sentiment.
The Saudi stockmarket slipped 0.8 percent to its lowest finish since July 29 and has now shed 5 percent since hitting a four-month peak on Sept. 15.
Crude oil has fallen 9.9 percent over the same period, trading at $89.13 a barrel at 1349 GMT on Monday, while Saudi Arabia's petrochemicals index was down 0.7 percent on the day.
Oil prices must be above about $75 a barrel to meet the government's spending budget, said Hesham Tuffaha, head of asset management at Bakheet Investment Group, claiming worries over the recent drop were exaggerated.
"We don't want oil to reach prices that will impact global demand," said Tuffaha.
He was upbeat on the prospects for local stocks, arguing they were undervalued.
The Saudi bourse's price-to-earnings ratio is about 12 when outliers Kingdom Holding and Saudi Electricity are excluded, Tuffaha said. That is well below the historical average of 16-20.
Kingdom Holding, the investment vehicle of billionaire Prince Alwaleed bin Talal, rose 0.7 percent after the company said it had sold a land plot in Riyadh for 250 million riyals ($66.66 million) and expects to book a gain in the third quarter.
Dubai's stock index fell 1.1 percent, retreating from Sunday's 23-week high.
"Today's drop is more linked with weakness in Saudi Arabia and other Gulf markets, which is starting to affect sentiment in the UAE," said Marwan Shurrab, vice president and chief trader at Gulfmena Alternative Investments.
Dubai is the top-performing Gulf benchmark in 2012, rising 20.2 percent year-to-date, although it remains 74 percent below a 2008 peak when the emirate's real estate crash sent house prices and property stocks tumbling.
Indications the sector is recovering - some developers have relaunched delayed projects as well as announcing new ones in recent months - are tempting equity investors back.
"Real estate isn't going to recover overnight, but there are signs of improvement and investors are looking at the sector's stocks to potentially help them recoup most of their losses of the past four years," said Shurrab.
"The focus is on real estate companies' potential rather than the current situation."
Bellwether Emaar Properties dropped 2.1 percent, easing from Sunday's 22-month high. The developer is forecast to report a 27 percent rise in third-quarter profit, according to analysts polled by Reuters.
Telecom stocks lifted Oman's index to a 14-week high, escaping the gloom on other Gulf markets as regional investors chased Muscat's dividend yields.
Oman Telecommunications (Omantel) rose 1 percent. The former monopoly's third-quarter profit is forecast to rise 8.9 percent, according to a Reuters poll.
Shares in rival Nawras climbed 1.4 percent, trimming year-to-date losses to 19.5 percent.
"There has been incremental fund flow from the region into Oman," said Kanaga Sunder, head of research at Gulf Baader Capital Markets.
These investors are chasing dividends, with Oman's yields among the highest in the Gulf, he said.
"There's considerable interest in both telecom stocks," said Sunder. "Nawras has underperformed the markets, which is why you're seeing more buyers coming in at current levels."
World stocks fell on Monday after the World Bank cut its growth forecast for China, emphasizing concerns about the strength of the global economy.