The GCC’s investment industry is counting the cost of the market uncertainty over the spread of coronavirus. Investors lost more than $70 million in one day on March 1 following a stock market meltdown while a number of bond issuances have been postponed.
The losses were largest in Saudi Arabia where $41 billion was wiped off stock value, while investors in Dubai, Abu Dhabi and Qatar lost $6 billion, $8.3 billion and $11.9 billion. Meanwhile Kuwait suspended trading for the day after its index dropped by 11%.
Meanwhile, the UAE’s largest Islamic institution, Dubai Islamic Bank, has postponed an upcoming sukuk issuance amid coronavirus concerns. The issuance was planned for February 26 and was forecast to raise $750 million.
Many of the stocks rallied the following day after central banks stated their intention to provide economic support during the crisis, however, volatility is likely to remain if the number of new cases continues to grow.
The UAE’s central bank has issued guidance to local banks, advising them to take measures to mitigate the economic effects of the coronavirus such as reducing fees for affected customers, deferring payments and rescheduling loans.
The measures have had a mixed reaction. Credit rating agency Moody’s said the steps would support the economy and “contain contingent liability risk by preventing potential liquidity challenges turning into solvency issues”.
However, Moody’s also warned that the guidance is credit negative for banks “because it will lower system-wide transparency of banks’ asset quality if sustained over the long term”.
At the time of writing, the UAE has reported 27 coronavirus cases, three of which have recovered. Most cases have been reported in Kuwait (58) and Bahrain (49), mostly linked to residents travelling from Iran. Qatar has reported eight cases while Saudi Arabia has reported six cases, one of which has since recovered and has been released from quarantine.
Travel bans are in place across the GCC with the UAE warning residents, including ex-pats, not to travel anywhere and also stating that people entering the country will be subject to medical check-ups.
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