Saudi shares up on MSCI decision, Dubai listed Air Arabia tumbles

DUBAI - 21 June 2018: Saudi shares rose at the open on Thursday, while Dubai-listed Air Arabia tumbled after the carrier revealed it had an exposure of $336 million to embattled Dubai private equity firm Abraaj.

The Tadawul All-Share Index was up 0.3 percent, led by financial shares, after the kingdom’s bourse was granted inclusion by MSCI into the index provider’s emerging markets benchmark. Al Rajhi Bank and the country’s largest lender National Commercial Bank were both up one percent.

On the Dubai bourse Air Arabia declined more than six percent, as investors continued to sell shares of the carrier this week since it said on Monday it had appointed a team of experts to ensure the airline’s investment in Abraaj, which has filed for provisional liquidation, is protected.

Air Arabia said the impact was limited to its investment portfolio and that there was no significant effect on the airline’s daily or future business.

On Thursday ahead of market open, Abraaj announced that it agreed to sell its Latin American, Sub Saharan Africa, North Africa and Turkey Funds management business to U.S. investment firm Colony Capital Inc.

FAB Securities CEO Mohammed Ali Yasin said the announcement might calm markets’ fears “but I see little change to lower the concerns of Air Arabia losing a substantial part of their investments or having to take big impairments until a final agreement is signed and the recoveries of those investments take place.”

The Dubai Financial Market General Index was little changed, down 0.2 percent. The Abu Dhabi Securities Exchange General Index was also little changed, down 0.2 percent.

Kuwait shares also opened lower, down 0.3 percent even after MSCI said it put the country on its watch list for a potential upgrade to emerging markets status.

MSCI’s decision should be announced in June 2019 with implementation in May 2020 if favorable, Dubai-based Arqaam Capital said in a note to clients.

Financial stocks led the declines. National Bank of Kuwait slipped 0.4 percent, while Gulf Bank of Kuwait lost 1.7 percent.