DUBAI: Middle East markets slumped to multiweek lows on Wednesday after the United States moved a step closer to launching punitive strikes against Syrian President Bashar Assad following his forces’ alleged use of poison gas. Russian President Vladimir Putin signaled a readiness to drop his opposition if Damascus were proven to have carried out a chemical weapons attack.
Putin’s comments came after two key figures in the U.S. Congress backed U.S. President Barack Obama’s call for a strike on Syria, which is due to vote on the issue next week as fears escalate that such action could widen the conflict and disrupt oil supplies from the region.
Dubai’s bourse fell 3.7 percent to an eight-week low as many retail investors opted to cut their market exposure.
“Everything is in risk-off mode and given the scale of the fall, this is retail investors staying cautious,” said Amer Khan, the fund manager at Shuaa Asset Management.
“These are headline-driven fears as local fundamentals haven’t changed. In the medium term, even if there is a limited attack, it will benefit the UAE in terms of capital inflows – it has in the past and I don’t expect it to change now,” said Khan.
Small-caps stocks that saw heavy speculative buying in recent weeks were hardest hit. Blue chips will likely outperform in the near term as investors seek companies with strong fundamentals, analysts said.
Abu Dhabi’s index fell 2.3 percent and Qatar lost 1.9 percent, also hitting eight-week lows.
Kuwait’s bourse dropped 2.6 percent in its ninth straight loss to slump to its lowest finish since April 24.
“The game changes a little bit now – we will have more volatility in the markets and it will be closely linked to Syria news flow,” said Sebastien Henin, portfolio manager at the National Investor.
“As long as GCC countries are far from the conflict, I don’t see a reason to be pessimistic from an economic point of view,” said Henin.
Saudi Arabia’s measure fell 2.2 percent to its lowest close since July 3. Wednesday’s drop cut 2013 gains to 12.7 percent.
The retail sector benchmark dropped 3.7 percent. It hit an all-time high in mid-August, but the prices have fallen sharply as investors booked gains.
The banking index fell 2.1 percent and the petrochemical sector’s measure lost 1.7 percent, despite higher oil prices. Brent crude traded above $115 per barrel at 1246 GMT.
Elsewhere, Egypt’s main benchmark slipped 0.1 percent, extending 2013 losses to 5 percent. Selling was capped on the bourse as bargain hunters stepped in.
Shares in Arabia Cotton Ginning surged 9.9 percent, up for a third day. Traders said the firm may transform into a real estate company and use its land holdings to build properties.
The Egyptian Financial Supervisory Authority approved the firm’s request to hold an extraordinary general meeting to look into amending the company’s objectives.