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Middle-East indexes tumble on first day of post-Brexit trading Open in fullscreen

The New Arab

Middle-East indexes tumble on first day of post-Brexit trading

Britain's decision to leave the EU sent shockwaves around the world [AFP]

Date of publication: 26 June, 2016

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Gulf authorities await clarity over the full impact of Britain's exit from the EU on stocks and investments.

Stocks in the Middle East took a drop on Sunday - the first day of trading after Britain's decision to exit the European Union - following a global trend in reaction to the historic move.

The Saudi Tadawul index - which is the region's largest - closed 1.1 percent lower, accompanied by a 5.54 percent drop for Egypt's EGX 30.

Dubai's main index was also down 3.25 percent. Abu Dhabi's index fell 1.85 percent.

The indexes re-opened as usual after closing on Thursday for for Middle Eastern investors, many of whom had expected Britain to retain its EU mebership. This brought huge uncertainty to global markets on Friday, with the UK's own sterling currency crashing 10 percent to a 31-year low.

Following the announcement of a 'Brexit', some firms sold their risk assets while the picture becomes clearer about the full impact of the event.

Oil prices also dipped, with US crude falling 4.9 percent and closing at $47.64 per barrel in New York. London also saw Brent crude fall 4.9 percent to $48.41 at closing time on Friday.

Reason to fear?

Financial authorities in the Gulf have tried to reassure investors in the region about the impact that Britain's referendum outcome will have on their banks.

Authorities in Saudi Arabia and the UAE assured those concerned that they will be watching the impact of the UK's decision to leave. Investors in both countries may be somewhat calmed by the fact that their currencies are pegged to the US dollar, thus limiting exposure to Brexit's negative effects.

"Due to the limited connection between the UAE financial system and that of the UK, the channels through which financial institutions in the UAE could be affected by the state of uncertainty over relations between the UK and the EU are limited," the UAE's central bank said in a statement.

This sentiment was also voiced by a member of the UK government who told The New Arab on Friday that business relations between Britain and the Middle East can and should remain the same.

"We are aware of the sovereign wealth funds that are spent here – those conditions will not change," said Conservative Party MP Tobias Ellwood.

"In fact, those conditions were created quite separately from the EU to allow us to be attractive not just for the Middle East, but for other countries around the world to invest in Britain."

 

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