* Margin calls magnify fresh sell-off
* UAE markets erase all 2014 gains
* Qatar falls sharply despite bullish economic outlook
* Saudi’s Ma’aden tumbles as new shares hit market
* Egypt posts biggest daily loss in two years
By Olzhas Auyezov
DUBAI, Dec 14 (Reuters) - Gulf stock markets extended their plunge on Sunday as oil’s drop to a new five-year low sparked a fresh wave of panic selling. The bourses’ losses left Qatar and Bahrain as the only Gulf markets with year-to-date gains.
Brent crude dropped nearly 3 percent and settled below $62 a barrel on Friday after the International Energy Agency cut its outlook for demand growth in 2015.
Investors’ main concern is that governments in the region may slash spending in line with falling oil export revenues, which would hurt economic growth in non-oil sectors.
With the exception of Oman and Bahrain, where state finances are relatively weak, analysts and fund managers think that scenario is unlikely. Qatar’s planning ministry, for example, predicted in a report on Sunday that its economy would grow 7.7 percent next year on the back of strong government spending, and that it would still run a large fiscal surplus.
But investors were in no mood to heed such positive forecasts and Qatar’s equities benchmark tumbled 5.9 percent nonetheless.
Oil is not the only factor behind a downtrend that has wiped more than $150 billion of value off Gulf stock markets since the end of October. Retail investors who dominate trade in Gulf markets have been selling frantically to cut losses, and some are being forced to sell by margin calls on leveraged positions.
Dubai’s benchmark tumbled 7.6 percent on Sunday - its biggest daily loss in six years - to 3,321 points, wiping out all its year-to-date gains; at its peak in May, the market was up 59.5 percent on the year.
Developer Emaar Properties and builder Arabtec Holding, the two stocks which topped trading volumes, lost 8.0 and 9.7 percent respectively. Dubai Islamic Bank and Union Properties fell their daily 10 percent limits.
“It’s sentiment over fundamentals,” said Sanyalak Manibhandu, manager of research at NBAD Securities in Abu Dhabi. “People are just doing more of what they have been doing for the last few weeks.”
But he added: “This is not 2008-2009,” referring to the global financial crisis which led to a crash in Gulf equities. This time around, economies of many oil exporting countries are stronger; real estate markets are not crumbling, banking systems are healthy and Gulf currency pegs to the U.S. dollar are not under threat.
Dubai’s market is particularly volatile because some investors have leveraged their purchases with bank loans and investors from around the Gulf treat Dubai as a venue to make short-term profits.
But other bourses in the region also took a beating on Sunday. Abu Dhabi’s market dropped 3.6 percent, also wiping out its remaining 2014 gains. After trading closed, the emirate’s bourse said it would suspend trading for five minutes in stocks that fell 5.0 percent, becoming the first regulator in the region to take such a step in response to the downtrend.
Many market players doubted that the move would do much to support the market, however.
“The market is supposed to be a free market,” said Teymour El Derini, director of regional sales and trading at Naeem brokerage in Cairo. “Such a constraint does not give investors confidence. If stocks are going to go down, they will go down.”
Saudi Arabia’s index dropped 3.3 percent to 8,119 points, a 13-month low.
Saudi Arabian Mining Co (Ma’aden) fell 9.7 percent after the bourse said it had deposited shares from its 5.6 billion riyal ($1.5 billion) rights issue into investors’ accounts. In the current climate, investors will be tempted to sell some of them.
Kuwait dropped 2.9 percent and Oman fell 3.2 percent. Shares in telecommunications firm Viva Kuwait , which listed on Sunday more than six years after its initial public offer, tumbled 7.1 percent.
Qatar and Bahrain are now the only markets in the Gulf that are still in the black this year, up 7.1 and 10.7 percent respectively. But Bahrain’s resilience may simply be due to low liquidity which has so far limited selling.
Rating agency Standard and Poor’s on Friday cut its outlook on Bahrain’s ‘BBB’ sovereign rating to negative from stable.
“We think a period of lower oil prices will exacerbate existing structural weaknesses in Bahrain’s public finances, absent corrective measures,” it said in a report. “However, we anticipate regional financial support to Bahrain will continue to be forthcoming, and we consequently expect its economic growth to continue.”
Egypt’s market succumbed to the bearish sentiment on Sunday and tumbled 5.2 percent, its worst daily drop in two years.
“We opened this week seeing the dive in global markets and continued sell-off in the region and hence we followed the pace,” said Mohamed Radwan, director of international sales at Pharos Securities in Cairo.
Egypt, as an oil importer, stands to benefit from lower energy prices, but Gulf nations are the main donors to the Cairo government and key sources of investment. Investors fear these flows of funds will diminish if the Gulf states are making less money from oil.
* The index tumbled 7.6 percent to 3,321 points.
* The index dropped 3.6 percent to 4,210 points.
* The index fell 3.3 percent to 8,119 points.
* The index tumbled 5.2 percent to 8,716 points.
* The index dropped 5.9 percent to 11,114 points.
* The index fell 3.2 percent to 5,624 points.
* The index fell 2.9 percent to 6,275 points.
* The index lost 0.6 percent to 1,382 points. (Editing by Andrew Torchia)