Qatar's stock market fell sharply on Monday as funds flowed out because of changes to MSCI's emerging market index and concern about the impact of low energy prices on the economy. Other Gulf markets fared much better, but Egypt's sank on currency fears.
Qatar's main index tumbled 4.4 percent, its biggest daily drop since August, to a two-year low of 10,091 points in the heaviest trading volume for six months.
Index compiler MSCI was due to add overseas-listed Chinese companies to its emerging market index after the close on Monday; EFG Hermes calculated in mid-November that by diluting Qatar's weighting in the index, this would suck $92 million from the Qatari market.
That is not a large amount compared to Qatar's market capitalisation of $155 billion, but selling by passive funds in line with the MSCI rebalancing on Monday "met with limited buyers," said Sebastien Henin, head of asset management at The National Investor in the United Arab Emirates. "Also, the liquidity is not great in Doha."
Buying support has weakened because of concern about the impact of low energy prices on Qatari state finances and tightening banking sector liquidity.
The Qatari riyal dropped in the forward foreign exchange market last week as traders cited concern that Qatar might have trouble agreeing with banks on the pricing of a syndicated loan of up to $10 billion. That could prompt the government to borrow more domestically, further tightening liquidity.
The emir has said next year's budget will restrain spending and officials have been talking of privatising state companies, which could temporarily at least weigh on the stock market.
Qatar Gas Transport Co (Nakilat) rose 1.3 percent because it would be added to MSCI's emerging markets index after the close; Gulf International Services plunged 9.4 percent because it was due to be deleted. Islamic bank Masraf Al Rayan sank 5.9 percent and Industries Qatar lost 4.8 percent.
UAE stocks were also exposed to the MSCI rebalancing - EFG Hermes anticipated an outflow of $64 million - but they were much stronger, reflecting better liquidity and the government's more transparent communication of its strategy to cope with cheap oil.
Abu Dhabi's index climbed 1.5 percent as Etisalat , which was joining MSCI's emerging index, jumped 10 percent and was the most active stock. Investors had already bought in anticipation, but some passive funds tend to move only on the last day before index changes.
National Bank of Abu Dhabi, which had tumbled 6.0 percent on Sunday, sank a further 5.9 percent. Traders said there was no fresh negative news but thin trade was magnifying the impact of sell orders.
Dana Gas rose 2.1 percent; it had surged its 15 percent daily limit on Sunday after it said the London Court of International Arbitration had directed the Kurdistan regional government to pay $1.98 billion to a consortium including Dana within 28 days. The KRG responded that it had over $3 billion of counter-claims against Dana.
Dubai rose 0.4 percent but Emaar Properties dropped 1.0 percent. Dubai real estate firms have been weak in recent days on tighter banking sector liquidity and the risk of a further property market pull-back. Emirates NBD , Dubai's largest bank, slipped 2.4 percent.
The Saudi stock index eased 0.2 percent. Emaar Economic City rose 1.3 percent, however. It has gained 10 percent since it said on Sunday last week that authorities, who have been investigating how the firm acquired land in the industrial zone which it is developing, would let it keep the land to protect the interests of investors.
Egypt's index sank 1.9 percent to 6,357 points, approaching technical support on the November low of 6,302 points. It had risen 0.8 percent on Sunday as Tarek Amer, a well-regarded former commercial banker, took over as central bank governor. Investors hope he can resolve Egypt's foreign exchange shortage and smoothly manage the devaluation which many think is inevitable.
However, there was no indication after Amer met his officials on Sunday of what strategy the central bank will adopt. Also, EFG Hermes calculated the MSCI rebalancing would siphon $17 million out of Egypt.
Commercial International Bank, seen as a bellwether of foreign investor sentiment, dropped 1.4 percent.
The latest Reuters survey of Middle East fund managers, published on Monday, found 29 percent expect to cut allocations to Egyptian equities in the next three months and only 14 percent to increase them - the most bearish balance since the survey was launched in September 2013.
* The index edged down 0.2 percent to 7,240 points.
* The index rose 0.4 percent to 3,204 points.
* The index climbed 1.5 percent to 4,236 points.
* The index tumbled 4.4 percent to 10,091 points.
* The index sank 1.9 percent to 6,357 points.
* The index edged down 0.1 percent to 5,802 points.
* The index dropped 1.7 percent to 5,548 points.
* The index rose 0.3 percent to 1,233 points.