The market in Opec kingpin Saudi Arabia, the largest in the Arab world, dropped sharply for the fourth consecutive day, reflecting what analysts said was a sharp correction across the region.
The value of Gulf bourses dropped on Tuesday to just under one trillion dollars, down some $150 billion from their 2005 value and more than $250 billion below the peak.
The Saudi Tadawul All-Shares Index (TASI) shed 4.75% to close below the 15,000-point psychological barrier for the first time this year at 14,900.40 points.
The TASI has so far lost 10.84% since the start of the year and a whooping 27.8% from its all-time high of 20,634.86 points reached on 25 February. It has shed 16.9% during the past four days.
"I think we are now at a serious turning point ... . It is certainly the beginning of a crash though the market is expected to resist at 12,200 points," said Ali Dakkak, professor of economics at Jedda-based King Abdulaziz University.
"We need swift actions and decisions to restore confidence to investors," a majority of whom are speculators who have been lured into the market by sharp price increases and handsome profits, Dakkak told AFP.
But Kuwaiti financial analyst Ali al-Nimesh characterised the fall as a "long-term correction" rather than a crash.
"It's still early to call it a crash. The indices are expected to rebound slightly sometime soon, but this appears to be a long-term correction cycle. It may continue for two years," Nimesh told AFP.
Saudi investors' attempts to exit
may have caused the slide
He said he expected the Saudi market to lose between 50% and 60% of its peak before rebounding.
In Kuwait, investors staged a protest outside parliament, urging MPs to intervene after the market registered its biggest single-day loss and closed at a six-month low.
"We want a complete probe into what has happened in the market since last Wednesday," when the index began to slide, demanded one investor. "Is our government weaker than those pirates?"
The Kuwait Stock Exchange Index finished down 3.7% or 382.90 points at 10,057.50 points, its lowest close since 14 September. It is now 12.1% below its 2005 close and down 16.6% from its all-time high of 12,054.70 set on 7 February.
The Kuwait Investment Authority, the state investment arm, promised to inject cash into the market on Wednesday after a protest by hundreds of small investors after the index dropped 257.8 points.
Stock markets also plunged in the United Arab Emirates, Bahrain and Qatar.
In Egypt, the Cairo stock market trimmed its losses to 6.62% after trading was stopped in early afternoon when the main index lost 11.3% in early afternoon trade, its biggest single-day drop in five years.
The index was at 5589 points compared with the close on Monday of 6296.
Analysts said a correction in the market was inevitable given the 148% gain in 2005 and the speculative bubble it fuelled.
A sharp rise in oil prices provided
abundant liquidity for investors
"A correction was not only necessary but inevitable," said Ahmed Hefnawi, analyst with investment bank EFG-Hermes.
"There were people in Egypt that quit their jobs to play the stock market, today they will pay the price."
Dakkak attributed the regional loss to action by Saudi dealers, who invest heavily in all Gulf stock markets, and have recently pulled out to cover losses back home.
"It is a chain reaction. Saudi investors have withdrawn much of their money from stock markets in the Middle East, including Egypt and Jordan, causing them to decline."
Gulf markets have increased six to seven fold since 2001 because of abundant liquidity generated from a sharp rise in oil revenues.
The upward trend and lucrative profits lured millions of small investors including women.
"Almost 60% of Saudi investors are small dealers. They depend mainly on speculation and whenever a decline happens they try to exit, causing the market to slide," Saudi economist Abdulaziz al-Daghestani said.
"Recently it became like gambling and not investment in most Gulf markets. That's why we are seeing the fast fall."