Qatar stock market tumbles on diplomatic rift with Saudi, GCC states

DUBAI: Qatar´s stock market plunged on Monday after Saudi Arabia, Egypt, the United Arab Emirates and Bahrain severed ties with Doha, accusing it of supporting terrorism.

The Qatari stock index sank 7.6 percent in the first hour of trade. Some of the market´s top blue chips were hit hardest, with Vodafone Qatar, the most heavily traded stock, sliding its 10 percent daily limit.

Qatar National Bank, the country´s largest bank, dropped 5.7 percent. Saudi Arabia, the UAE and Bahrain announced the suspension of transport ties with Qatar, and gave Qatari visitors and residents two weeks to leave their borders.

With an estimated $335 billion of assets in its sovereign wealth fund, a trade surplus of $2.7 billion in April alone and extensive port facilities which it can use instead of its land border with Saudi Arabia, which has been closed, Qatar appears likely to be able to avoid a crippling economic crisis.

The six countries in the Gulf Cooperation Council do little merchandise trade with each other, instead relying on imports from outside the region, and Qatar´s liquefied natural gas shipments by sea are expected to continue normally.

Saudi Arabia and other GCC countries traditionally account for only about 5 to 10 percent of daily trading on the Qatari stock market, according to exchange data. But the diplomatic rift could have a serious impact on some business deals and companies in the region, particularly Qatar Airways, which can no longer fly to some of the Middle East´s biggest markets.

Saudi Arabia called on international companies to avoid Qatar, raising the prospect that it might try to make foreign firms choose between doing business in Qatar and obtaining access to the much bigger Saudi economy.

Talal Touqan, head of resesrch at Abu Dhabi’s Al Ramz Capital, said it was not clear how long the dispute would last and markets could recover quickly if tensions eased. “This is a reaction to political noise which has a direct impact on volatility - it may be short-ived and fully reversible if the political situation starts to abate,” he said.

Kunal Damle, an institutional broker at SICO Bahrain, said Qatari state funds might step in to support their market later in the day. Other GCC stock marikets also fell, with Dubai losing 0.8 percent and Saudi Arabia falling 0.2 percent.

Meanwhile, Qatar Petroleum is still seeking gasoil from countries in the Gulf Cooperation Council (GCC) even as some members of the group have severed ties with the country, said two trading sources on Monday.

The state-run company was looking for up to two gasoil cargoes a month for delivery over July to September in a tender that closes on Monday. Qatar Petroleum has not amended the bid, the sources said.

One of the requirements of the tender was that the cargoes originate from the GCC, whose member countries include the United Arab Emirates, Bahrain, Saudi Arabia, Oman, Qatar and Kuwait and Yemen.

"They have not amended the tender from what I can see so far, but perhaps it´s still early hours," said one of the sources, a Gulf-based trader said.

Saudi Arabia, Egypt, the UAE and Bahrain cut their ties with Qatar on Monday, accusing it of supporting terrorism, opening up the worst rift in years among some of the most powerful states in the Arab world.

The coordinated move dramatically escalates a dispute over Qatar´s support of the Muslim Brotherhood, the world´s oldest Islamist movement, and adds accusations that Doha even backs the agenda of regional arch-rival Iran.

Qatar Petroleum is not typically a buyer of gasoil but has been importing the fuel due to some supply issues in its domestic market, the traders said.

While the traders expect the tender to likely be re-issued or cancelled given the latest development, they do not expect a major impact on flows of the fuel.

"Qatar is a regular exporter of gas-to-liquid (GTL) diesel from the Pearl GTL (plant) which (Royal Dutch Shell) partners, so Shell can easily source the gasoil from elsewhere if needed," said the second source, a Singapore-based trader.

Qatar Petroleum´s exports of jet fuel are unlikely to be disrupted as the aviation fuel is usually shipped to international markets, said the first source.

"I think the biggest impact will be on LNG, which stays in the region," the source added. Qatar meets almost one-third of global LNG demand and Egypt, which struggles to meet its electricity needs, has imported an average 857,000 cubic metres per month of LNG from Qatar since January 2016, according to shipping data in Thomson Reuters Eikon. The fuel is used largely for power generation.