DUBAI: Gulf Arab shares dropped Thursday, sustaining losses for a second week in a row, as a possible United States military strike against Syria moved one step closer and raised worries of triggering wider conflict in the region.
A U.S. Senate committee voted in favor of military action, clearing the way for a vote in the full Senate, likely next week.
The resolution sets a 60-day limit on any engagement in Syria, with a possible 30-day extension, and bars the use of U.S. troops on the ground for combat operations.
In the United Arab Emirates, Abu Dhabi’s measure fell 3 percent in its sharpest one-day drop since January 2011. It lost 5.3 percent this week.
Dubai’s index retreated 2.5 percent to its lowest since July 7 and suffered the heaviest losses among peers for the week at 7.4 percent.
“Nobody is surprised by the limited nature of the planned U.S. action but investors are expecting further downside risk before the attack,” said John Sfakianakis, chief investment strategist at Saudi investment firm MASIC. “The uncertainty is around when it [the attack] will happen and how Syria’s allies will react.”
Saudi Arabia’s index slipped 0.4 percent, taking the week’s losses to 1.7 percent. Losses were capped as bargain hunters returned to pick up bluechips.
Saudi Basic Industries Corp (SABIC), the region’s largest stock by market value and the world’s largest chemicals producer, gained 0.3 percent. Heavyweight lender Al-Rajhi Bank also added 0.3 percent.
Selective buying in Saudi Arabia and other Gulf bluechips is backed by solid fundamentals like growing economies and demand from consumers as well as buoyed oil prices, analysts say.
“Valuations are now looking attractive given the correction and there is a risk-to-reward thinking process where people are selectively investing. My strategy is to hold and if I have cash on the side, to buy sometime next week,” Sfakianakis added.
In Qatar, the benchmark declined 1.6 percent, hitting its lowest level since June 24 and losing 4.3 percent this week.
Kuwait’s index fell 0.7 percent, extending weekly losses to 5.4 percent. The heavily retail-dominant market dropped for 10 consecutive sessions in its longest losing streak in 15 months.
In Egypt, Cairo’s benchmark index slipped 0.4 percent after an assassination attempt on the interior minister.
The minister, Mohammad Ibrahim, survived unhurt when a remote-controlled bomb blew up as his convoy drove through Cairo’s Nasr City district.
Investor sentiment is weak as the interim government attempts to manage a security situation, including protests by the Muslim Brotherhood in response to the ouster of former President Mohammad Morsi.
“The market is very fragile and locals are exhausted from buying,” said Mohamed Radwan, director of international sales at Pharos Securities. “Foreigners are not participating much until there is further clarification on the government road map.”
The army-backed government has laid out plans for parliamentary elections and said it will move ahead despite a dire security situation and the protests by Morsi supporters.
Elsewhere, world shares rose, backed by upbeat U.S. auto sales data as investors put the Syrian conflict on the back of their minds. Brent crude held above $115 per barrel.