Irshad Salim — Qatar’s stock market plunged on Monday after Saudi Arabia, Egypt, UAE, Bahrain, Yemen, Libya, Maldives and Mauritius severed ties with Doha, accusing it of supporting terrorism.
The Qatari stock index sank almost 8 percent in the first hour of trade, its sharpest fall in over seven years. Some of the market’s top blue chips were hit hardest, with Vodafone Qatar, the most heavily traded stock, sliding its 10 percent daily limit.
Qatar National Bank, the country’s largest bank, dropped close to 6 percent.
Investors viewed the diplomatic withdrawal as a major breakdown between powerful Gulf nations, who are also close U.S. allies, but say there’s no reason for panic, according to Bloomberg.
On Monday, Saudi Arabia, the UAE and Bahrain announced the suspension of transport ties with Qatar — the world’s largest exporter of liquefied natural gas, and gave Qatari visitors and residents two weeks to leave their borders as the Kingdom closes its land border with Qatar, a move that could have severe economic consequences for the country. Some analysts say that may not really emerge given the geopolitical history of the region, according to Reuters.
With an estimated $335 billion of assets in its sovereign wealth fund, a trade surplus of $2.7 billion in April alone and extensive port facilities which it can use instead of its land border with Saudi Arabia, Qatar appears likely to be able to avoid a crippling economic crisis.
The six countries in the Gulf Cooperation Council do little merchandise trade with each other, instead relying on imports from outside the region, and Qatar’s liquefied natural gas shipments by sea are expected to continue normally.
Saudi Arabia and other GCC countries traditionally account for only about 5 to 10 percent of daily trading on the Qatari stock market, according to exchange data.
But the diplomatic rift could have a serious impact on some business deals and companies in the region, particularly Qatar Airways, which can no longer fly to some of the Middle East’s biggest markets. Saudi, UAE and Egyptian airspace have been declared no-go for Qatari flights.
Talal Touqan, head of research at Abu Dhabi’s Al Ramz Capital, said it was not clear how long the dispute would last and markets could recover quickly if tensions eased.
“This is a reaction to political noise which has a direct impact on volatility — it may be short-lived and fully reversible if the political situation starts to abate,” he said.
Kunal Damle, an institutional broker at SICO Bahrain, said Qatari state and sovereign funds might step in to support their market later in the day.
According to analysts, previous regional attempts to persuade Qatar to change its policies haven’t succeeded, but Monday’s announced steps go further than any previous bid. Qatar, “which now finds itself both regionally and economically isolated, may have few cards left to play,” wrote The Atlantic on the emerging scenario in the region.
Along with the block on re-exports from Dubai to Qatar, together the measures could even affect the monarchy’s preparations for the football World Cup it is due to host in 2022. And Aljazeera, the state-owned TV channel with a huge viewership in the region, is already taking a hit with ban imposed on it by the Kingdom.
Other GCC stock markets also fell, with Dubai losing 0.8 percent and Saudi Arabia falling 0.2 percent. But the bloodbath on Monday saw Doha’s index register an 12 per cent decline so far in the year.