DUBAI—Most stock markets in the Persian Gulf region tumbled Sunday as a downgrade of U.S. government debt by ratings firm Standard & Poor's triggered investor concerns about the health of the world's biggest economy and the outlook for global growth.
"The U.S. economy has certainly slowed recently and the European sovereign debt crisis is still far from over," said Akber Khan, director of asset management at Al Rayan Investment in Doha. "The last three years have underlined the linkages within the global economy so it is unreasonable to expect the rest of the world to be completely immune from disruptions in Europe and the U.S."
In Dubai, the benchmark DFM General Index fell 3.7% to 1484.31, while Abu Dhabi's main gauge lost 2.5% to 2603.22. Qatar's QE Index slid 2.5% to 8277.61 and Oman's MSM30 Index shed 1.9% to 5651.27. Saudi's Tadawul Index, the region's largest stock market, managed to post a modest 0.1% gain at 6078.05 after Saturday's 5.5% decline.
Sunday's pullback was triggered by Standard & Poor's Friday stripping the U.S. of its AAA credit rating, a move that casts severe doubt, say analysts, over the state and recovery of the U.S. economy. The downgrade came after Asian and European shares plunged Friday amid fears over the global economic outlook.
Gulf Arab officials remained noticeably silent Sunday on S&P's decision to downgrade the U.S., but analysts said the move would still likely have implications for the region's economies, especially if the U.S. economy were to slow markedly.
"It's hard to see any decoupling for the regional markets from the global economies. Any global slowdown in the U.S. and Europe will certainly weigh on the regional economies," said Rami Sidani, head of investment at Schroders Investment Management for the Middle East and North Africa.
In terms of stocks, Emaar Properties fell 5.3% to 2.88 United Arab Emirates dirhams in Dubai, while First Gulf Bank slipped 5.9% to 16 dirhams in Abu Dhabi. In Doha, Qatar Telecom lost 1.2% to 152.70 Qatari royals and Bank Muscat shed 4.6% to 0.688 Omani rial.
Despite Sunday's sharp retracement, some analysts said the pullback offers a buying opportunity and doesn't signal a return to market levels seen at the height of the financial crisis in 2008.
"We would view any weakness in the markets as a buying opportunity as we see the current environment as being fundamentally different to that of 2008, where Mena markets fell in line with global markets but then failed to register a concomitant recovery," strategists at Religare Capital Markets said in a note to clients.
—Brinda Darasha contributed to this article.
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