Stock market indices in the oil-rich Gulf region retreated across the board on Wednesday as western markets reacted with losses to the Chinese currency's devaluation and to the further decline in energy prices.
The Dubai financial market general index closed 1.25 percent lower to hit a one-month at 4,022.12 points. Dubai's sister market ADX in Abu Dhabi lost 1.12 percent to reach 4,765.76 points.
Earlier in the day, Asian and European markets reacted to the Chinese central bank's decision to devalue the RMB currency in two steps by 1.9 percent on Tuesday and by 1.6 percent earlier on Wednesday, which is the biggest devaluation in 20 years, pushing the currency of the world's second economy to a two-year low at 6.4485 to one U.S. dollar.
Also in the day, oil prices (WTI) hit a 52-week low at 42.51 U.S. dollars per barrel before recovering slightly. The volatility in oil also pulled markets down. The barrel currently trades 58 percent below the level a year ago. Kuwait's KSE market index dipped insignificantly to 6,285.60 points. Qatar's QE 20 Index slipped 0.13 percent to 11,772.66 points. Saudi Arabia's Tadawul All-Share Index in Riyadh which closes five hour later than its peers in the region was trading 0.90 percent lower on late Wednesday.
However, there were also positive market comments on China's currency move. Earlier in the day, the Abu Dhabi daily The National reported experts quotes saying weaker Yuan could help the United Arab Emirates' (UAE) economy.
Daniel Kaye, Oxford Economics' lead economist for the Middle East told The National "The fall in the yuan could, in principle, provide a boost to UAE imports of now cheaper Chinese goods."
"This would benefit firms that work in the trading sector, including suppliers and re-export companies. Ultimately, cheaper prices could also be passed on to local businesses and consumers."
China became in 2014 Dubai's biggest trading partner, surpassing India for the first time. Bilateral trade between China and Dubai surged 29 percent year on year to 175 billion dirham (47.68 billion U.S. dollars) of non-oil goods and services last year.
About 80 percent of that involved imported textiles, clothes, machinery and products made from gold, silver, copper and iron, according to the UAE Government.
The UAE's biggest bank Emirate NBD was quoted saying that China as an export-driven economy will get a boost from its weaker currency and what is good for China can only be good for the UAE as top importer in the Middle East. Dubai is home to the world's biggest man-made container port, the Jebel Ali free port, and re-export business is a major sector of the UAE economy.
Nevertheless, Kaye pointed out that a lower Yuan can also backfire at Arab oil exports as the barrel oil is valued in U.S. dollars at international markets. A lower Yuan means that China will get lower quantities of the "black gold" for the same amount of money as before.