GCC Stock Market in the Face of the 2020 Pandemic

As COVID-19 continues to change lives around the world, its severe impact on the global economy is already hinting towards tough times ahead.

GCC stock markets are no exception, and in fact, the initial signs of stress were already visible as early as February 2020. What makes this stock rout worse is the historically low oil prices. Brent Crude prices were already weak coming into 2020, and a production conflict with Russia and growing US oil supplies hit the GCC economy where it hurts the most.

This report tries to cover how the GCC stock markets have behaved since the Coronavirus outbreak.

Major Losses Across GCC Stock Market Amid COVID-19

March 1, 2020, witnessed one of the worst bear-market rallies across GCC stock indices, with investors losing over Dh257 billion ($70 billion) in a single day. Saudi Arabian investors registered the highest losses of over $41 billion that day.

And there have been multiple similar one-day movements across the regional markets. A close look at major indices reveal significant losses year-to-date, with ADX General falling 19%, MSCI TADAWUL 30 dropping over 16%, and QE General losing nearly 15% of its value.

Oil Pricing War Comes Back to Bite GCC Markets

Worldwide lockdowns have had a severe impact on the global demand for oil. Some reports even expect the demand to fall as much as 30% throughout the course of the COVID-19 pandemic.

The early oil-pricing conflicts with Russia have worsened the impact of COVID-19. The escalated commentary between Saudi Arabia and Russia led to a single-day fall of over 25% in oil prices (March 9).

With Brend Crude prices hovering close to $37 per barrel, oil exporters across the MENA region are set to witness a GDP deficit in excess of 11% in 2020.

Top Sectors Bleeding Money, Booking Losses

The global aviation, tourism, and hospitality industries have come under reeling pressure because of the global shutdowns. The UAE is an unfortunate example of this detrimental trend.

The UAE is home to some of the world’s largest airlines, including Emirates and Etihad Airways, with the aviation sector contributing as much as 5% to the empire’s GDP. The aviation industry, along with the tourism sector accounts for over 11% of the UAE’s GDP.

The worldwide lockdown has sent these sectors into a tailspin, with major airliners throughout the GCC region cutting their workforce. The tourism industry is witnessing a similar sentiment, adding to the overall woes of the GCC financial markets.

Hope for Recovery After Markets Open Post Eid Holidays

A mixture of adverse sector-wise movements and over-reliance of the GCC economies on key sectors has resulted in undesirable rating updates, with international agencies, such as Moody, downgrading their ratings to negative (for Saudi Arabia).

Amid a negative sentiment, there are some positive trends, such as the resilience shown by Gulf bonds throughout the COVID-19 pandemic. The Gulf region is becoming a massive contributor to the global debt markets.

As countries ease lockdowns and the global demand for oil picks up, the GCC stock market could witness a sharp recovery.