DUBAI, June 6 Qatar's stock market may remain
weak on Tuesday after Saudi Arabia, Egypt and the United Arab
Emirates severed ties with Doha, but the drop should slow from
Monday's 7.3 percent plunge, fund managers said.
Monday's panic selling may ease if investors start
speculating about the possibility of some kind of negotiated
solution, while some traders think Qatari state-linked funds
could eventually enter the market to provide support.
"While we think the near-term impact of the crisis is easily
containable by Qatar, which has substantial resources it can
employ, we see considerable risks regarding the economic and
financial impact of these sanctions the longer they remain in
place," said a note by Citigroup.
A key question for the market is whether Qatar's financial
ties to Saudi Arabia and the UAE are cut off, in addition to its
transport ties. Saudi and UAE bankers said late on Monday they
had so far received no instructions from their regulators to do
But some Sri Lankan banks stopped buying Qatari riyals
on Tuesday, saying their counterpart banks in
Singapore had advised them not to accept the currency.
On Monday some Egyptian banks said they too had stopped
dealings with Doha-headquartered lenders, though Egypt's central
bank urged banks to continue dealing in Qatari riyals.
A Saudi-based money market manager told Reuters that
although he had not received a directive from the Saudi central
bank to stop dealings with Qatar, he was "taking precautionary
steps to keep away" until the situation started to show signs of
A note by Capital Economics said one potential concern was
that Qatari banks, the dominant sector on Qatar's stock market,
might now find it more difficult to secure wholesale financing,
which could "precipitate a more abrupt cooling of the country’s
Gulf markets in general look set to have a soft tone after
global bourses dropped, partly because of the Gulf tensions.
Brent oil fell 1 percent on Monday and has since
retreated a further 0.4 percent to $49.26 a barrel.
Any losses in Saudi Arabia, however, may be limited by
expectations that MSCI will start on June 20 the process of
upgrading Riyadh to emerging market status. Hopes for this have
buoyed the Saudi market in recent days.
(Reporting by Celine Aswad; Editing by Andrew Torchia)