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Sunday, August 07, 2011 12:25 PM

Israel, Dubai, Saudi Arabia Shares Plunge in Wake of S&P Downgrade; Israel Drops 7%, Dubai 3.7%, Saudi 5.5%; Is S&P Downgrade to Blame?

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The Mideast markets typically run Sunday to Thursday. However, the Saudi Arabia market is open on Saturday. The global selloff hit Saudi on Saturday and spread to Israel and Dubai on Sunday.

Israel Drops 7 Percent, 19.9% Since April 21

Israeli Stock Index Tumbles Most Since 2008

Israel’s benchmark stock index plunged the most in almost 11 years after Standard & Poor’s lowered the U.S. credit rating and amid concern the widening sovereign debt crisis in Europe will stall global growth.

Israel Discount Bank Ltd. (DSCT), the country’s third-largest lender, skidded 10 percent. Nice Systems Ltd. (NICE) slumped the most since November 2008. All 25 shares in the TA-25 Index tumbled, pushing the gauge down 7 percent, the biggest decline since October 2000, to 1,074.27 at the 4:30 p.m. close in Tel Aviv. The index is near the so-called bear-market territory after retreating 19.9 percent from a record high of 1,341.89 on April 21.
Dubai Shares Drop 3.7 Percent

Dubai Shares Drop Most Since February
Emaar Properties PJSC (EMAAR), developer of the world’s tallest tower, slumped 5.3 percent. Arabtec Holding Co. (ARTC) dropped the most since March after it said second-quarter profit fell 74 percent. The DFM General Index (DFMGI) lost 3.7 percent, the most since Feb. 28, to 1,484.31 at the 2 p.m. close in Dubai. The measure has plunged 12 percent from this year’s high in April, entering a so-called correction.
Saudi Shares Plunge 5.5%

Saudi Shares Plunge as U.S. Downgrade Fuels Concern Over Global Economy
Saudi Arabian shares tumbled for a third day, sending the benchmark index to its largest intraday drop since March, amid rising concerns about the global economy after Standard & Poor’s cut the U.S.’s credit rating for the first time.

Saudi Basic Industries Corp. (SABIC), or Sabic, the world’s biggest petrochemicals maker, fell the most in five months. Al Rajhi Bank (RJHI), the kingdom’s largest publicly traded lender by market value, reached its lowest price since March.

The 147-company Tadawul All Share Index (SASEIDX) slumped 5.5 percent to 6,073.44, the steepest decline since March 1, at the 3:30 p.m. close in Riyadh. All 15 industry groups fell. The gauge has fallen 10.5 percent from the year-high of 6,788.42 on Jan. 16.

“The Saudi market is reacting to the steep declines in global markets over the weekend,” said Asim Bukhtiar, an equity analyst at Riyad Capital. “Growing concerns of the U.S. relapsing into recession are driving sentiment.”
S&P Downgrade Did Not Cause This

Analysts worded all these reports as if the S&P downgrade was to blame or partially to blame. The facts of the matter are these.

  1. The global economy is slowing
  2. European debt crisis has escalated
  3. A global currency war is underway
  4. The US is headed for recession if not in recession now
  5. Europe is already in a recession in my estimation

The downgrade itself is not the problem. Rather the S&P downgrade (long overdue) is one of many symptom of a much larger global financial crisis. Nonetheless, expect many demagogues to make S&P the scapegoat if the decline escalates this week.

Mike "Mish" Shedlock
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