Officials in the Mideast rolled out measures aimed at ensuring ample liquidity amid the most volatile period for global markets since the financial crisis, but it wasn’t enough to stop the selling.
The UAE unveiled a “targeted economic support” plan worth around $27 billion, including interest-free collateralized loans to banks and reductions to capital buffers. In other words, a conceptually similar package to those seen across regions.
Meanwhile, Saudi Arabia is spending more than $13 billion to shore up private businesses, while Egypt has dedicated more than $6 billion to the COVID-19 fight.
The problem, though, is that when people are afraid to leave their homes, economic activity simply stagnates, which means liquidity measures aimed at businesses are the very definition of the phrase “necessary but not sufficient”.
Shares in Dubai cratered more than 3% on the day. To say it’s been a rough stretch would be an understatement.
In Egypt, stocks plunged more than 9%. It was the single worst session since November 25, 2012, when protests against then President Mohamed Morsi’s bid to consolidate power rattled sentiment.
Egyptian shares are down nearly 30% since local highs and sit at the lowest since November of 2016.
In Saudi Arabia, Aramco slashed its capex plans and said it will review spending in the years ahead in light of recent events. “We have already taken steps to rationalize our planned 2020 capital spending”, CEO Amin Nasser said, noting that the company is keen on implementing “a flexible approach to capital allocation”.
That “flexible” approach will entail between $25 billion and $30 billion in spending this year, versus the $35 billion to $40 billion tipped in the IPO prospectus. Spending last year was $32.8 billion. Aramco is, of course, engaged in an all-out price war with the Russians as of last weekend.
The shares are in a tailspin, having fallen sharply this year despite state support and all manner of incentives for investors to hold. The dividend plan remains unchanged.
Net income for Aramco was $88 billion in 2019, in case you were wondering.
On the whole, Saudi shares fell for a seventh session in eight on Sunday. The main gauge sits at the lowest levels since Trump’s election.