Stock markets in Saudi Arabia and Egypt retreated in early trade on Thursday as investors remained worried by the chronic weakens in oil prices and declines in international bourses.
The Saudi index <.TASI> fell 1.8 percent in the first half-hour of trade, with the petrochemical sector <.TPISI> dropping by the same magnitude.
"The swing factor in the markets is oil, because although technical analysis shows that the majority of stocks are in oversold territory, as long as Brent remains below $30 investors will have no confidence in any type of analysis," said a Jeddah-based portfolio manager.
Economists believe Saudi Arabia's state budget, announced last month, was based on an average Brent price of about $40 per barrel. If Brent now stays below $30, the government could be pressed into further spending cuts.
Saudi companies are coming under pressure in the thick of earnings season. Savola Group <2050.SE> plunged 4.4 percent despite reporting an 18.6 percent rise in fourth-quarter net profit, beating analysts' forecasts. Net profit was 515.3 million riyals ($137.3 million); analysts had on average forecast 478.5 million riyals.
Saudi Telecom Co <7010.SE> traded down 2.1 percent. It reported a 20.2 percent fall in fourth-quarter profit. Net earnings came in at 1.95 billion riyals; analysts had forecast STC would make 2.36 billion riyals.
Saudi Arabian Mining Co <1211.SE> (Ma'aden) declined 1.4 percent. The Gulf's largest miner reported results that were below expectations; it made a net loss of 5.7 million riyals. Ma'aden said no dividend would be paid for fiscal 2015 as the company was still in the process of developing and financing its major projects.
Abdulaziz Alhokair Co <4240.SE> plunged 9.2 percent after the retailer reported a 14.2 percent fall in third-quarter net profit. Earnings came in at 91.2 million riyals, below analysts' expectations.
"We believe the disappointing results were mainly due to the adverse impact of foreign exchange volatility, which hurt international revenue and margins," NCB Capital said in a note on Alhokair. NCB Capital had expected the company to make a quarterly profit of 130 million riyals.
Other small and mid-cap Saudi stocks, especially in the insurance sector, were dumped by nervous traders.
But Emaar Economic City <4220.SE>, a heavily traded mid-cap industrial land developer, climbed 3.1 percent after the company reported a 129 percent increase in fourth-quarter earnings. The developer is spearheading the development of a new city north of Jeddah, King Abdullah Economic City.
In Egypt, the main index <.EGX30> fell 2.0 percent as the bourse headed towards a multi-year low close.
"In Cairo the stock market is being dealt a double blow," said a Cairo-based trader. "On one hand, foreign managers are rotating out of stocks and into safe-haven assets or cash, and then there are the Arab investors who are not willing to commit to the region because of oil."
Orascom Telecom <OTMT.CA>, the most heavily traded stock, fell 1.9 percent and Commercial International Bank <COMI.CA>, a preferred stock among foreign funds, fell 1.9 percent.
