With little local news to distract traders, regional markets are likely to remain highly correlated to global stocks Saudi Arabia's index ended lower Tuesday for a second day, with worries over how a potential double-dip global recession would impact petrochemicals' earnings in the world's top oil exporter spurring renewed selling. Banks and petrochemicals were the two main sectors on the benchmark, accounting for about two-thirds of the weighting, with the latter a proxy for equity investors to bet on the kingdom's oil industry, which remains under state control. Saudi stock benchmark Tadawul All Share Index lost 0.48 percent to close at 6,061.53 points. "Petrochemicals dominate the Saudi market and they have a high correlation to oil prices, which is the main reason for Saudi volatility," said Shakeel Sarwar, head of asset management at investment bank SICO in Bahrain. "Oil prices have remained high, as have petrochemicals prices, but investors are nervous about what will happen over the next six to 12 months. "If there is another global recession it will negatively impact oil prices and petrochemicals' profitability will be impacted. That's how a recession would be transmitted to the Gulf." National Industrialization Co. dropped 1.1 percent and Saudi Basic Industries Corp (SABIC) slid 0.3 percent. The petrochemicals index eased 0.5 percent. Banks also retreated. SABB dropped 3.6 percent and Banque Saudi Fransi lost 2.2 percent, but trading was thin, with less than 150,000 shares traded combined. Elsewhere, Dubai index rose 0.4 percent to 1,485 points as volumes slumped to a week-low. Dubai's top bank by value climbed 1.4 percent, while rival Dubai Islamic Bank added 0.5 percent and budget carrier Air Arabia gained 1.1 percent. "There are no local drivers and to a certain extent we are tracking what's happening elsewhere - volumes are very poor," said Julian Bruce, EFG-Hermes director of institutional equity sales. "The main theme is the very low levels of activity, which will continue until we get a clearer picture elsewhere and maybe some positive news about the UAE, but at the moment we're not seeing either. "There is some select buying, but no one is in any real hurry, with no big clips of money going to work - the whole market is on the back burner." Abu Dhabi's measure edged 0.07 percent higher to 2,605 points. Qatar's index rose 0.3 percent to 8,333 points. Kuwait also advanced, climbing 0.1 percent to 5,861 points, despite none of the six largest stocks making gains, with trading concentrated in small cap, speculative stocks. These are the preserve of retail investors, indicating funds are largely absent. Oman's index made its largest decline in four weeks as foreign funds dumped banking and services stocks amid turmoil on global markets. The index slipped 1.1 percent to 5,732 points in its biggest drop since August 9, easing from Monday's five-week high to take its year-to-date losses to 15.1 percent. National Bank of Abu Dhabi and telecoms operator Etisalat were the main supports, rising 1.3 and 0.5 percent respectively. RAK Cement Co accounts for more than a quarter of all shares traded, surging 5 percent. Among the smallest stocks on the bourse, RAK's heavy trade indicated local day traders were dominant, with institutions largely sticking to blue chip names. Kuwait and Qatar benchmarks reversed early losses to end higher as a positive opening on European markets eased investors' fears following sharp declines in world stocks a day earlier. Global markets had tumbled on renewed recession fears for the US and Europe's sovereign debt troubles. Islamic lender Masraf Al Rayan climbed 0.8 percent, Qatar Electricity and Water added 1.5 percent and Qatar Telecom (Qtel) edged 0.2 percent higher. "Companies least exposed to global growth such as utilities and telecoms should fare better," says Robert Pramberger, acting head of asset management at Doha-based investment company The First Investor.
