JEDDAH, 4 February 2008 — After a roller-coaster month in January, the Saudi stock market started trading on a mixed note in February. After dropping 41.32 points on Saturday, the Tadawul All-Share Index (TASI) closed 20.13 points higher at 9,653.82 yesterday.
In January 2008, the index lost 1,500.94 points or 13.43 percent compared to the closing level of December 2007.
The stock index is down 13.62 percent so far this year.
According to the Tadawul report, total equity market capitalization at the end of January reached SR1.74 trillion ($464.75 billion), decreasing by 10.46 percent over the previous month. The total value of shares traded increased by 28.90 percent compared to December to reach SR329.44 billion ($87.85 billion).
The total number of shares traded surged by 23.01 percent to 8.04 billion compared to 6.53 billion shares traded in December.
The total number of transactions also increased by 9.73 percent to 6.30 million compared to 5.74 million trades for the month of December.
According to professor Mohamed Ramady of King Fahd University of Petroleum and Minerals, the biggest surprise of the recent ups and downs of the Saudi market is the surprise itself in that few seem to believe that the basic investor mentality has not changed much from the disasters of 2006 crash.
“Daily movements of 1.5-2.0 percent gains seemed once again to be the norm, rather than the exception, leading to fears that an asset price bubble is in the making. The issue here is that despite some new listings on the Saudi market, the number of listed companies is still too few, currently at 110 companies. The Tadawul index is also not sectorally diversified enough to reflect the true base of the Saudi economy. As such, a few companies tend to dominate market price movements, and sometimes these do not reflect the economic fundamentals of economy. The Saudi capital market will be in a much healthier trading position once it has a broader base,” he said. Until then, according to Ramady, “the yo-yo boom and bust cycles of the local market will remain with us and should not be a surprise. Psychology, rather than fundamentals, seems to be the main driver of the Saudi market all over again.”
Ramady points out that “as during the heyday of 2006, general paper profit-making, becomes a self-fulfilling prophecy that leads to a self-sustaining and self-congratulatory behavior amongst investors. This sucks in both the ‘irrational’ unsophisticated investors, as well as the ‘rational’ informed investors. They both end up having a ‘vested interest’ in error. No lessons seem to have been learned.”
The insurance sector made hefty gains yesterday. The insurance index jumped 5.65 points to 2,049.61.
Saudi Indian Company for Cooperative Insurance Company shares increased by the maximum limit 10 percent to SR90.75, Saudi Arabian Cooperative Insurance Company by 9.97 percent to SR104.75, Gulf Union Cooperative Insurance Co. by 9.94 percent to SR52.50 and Saudi IAIC Cooperative Insurance Co. by 9.86 percent to SR125.25.
The new insurance company set to make debut at Tadawul today. The Capital Market Authority (CMA) announced on Saturday that the listing and trading of Arabia Insurance Cooperative Company will begin today within the insurance sector with an unrestricted price limit for the first day of trading only.
Saudi International Petrochemical Co. (Sipchem) shares declined by 3.75 percent to SR38.50 yesterday. Sipchem increased its paid up capital by issuing 133,333,333 new shares (rights issue) at a price of SR15 per share (SR10 as nominal value and SR5 as a premium), raising its total number of issued shares to 333,333,333 effective Jan. 29.
Rabigh Refining and Petrochemical Co. (Petro Rabigh) shares fell 1.44 percent yesterday to close at SR51. On Jan. 27, Petro Rabigh was listed (with a paid up capital of SR8.76 billion divided into 876 million shares). The company offered 219 million shares at SR21 per share.
In January, Anaam International Holding Group Co. decreased its paid up capital from SR1.20 billion to SR109 million, hence reducing its total number of issued shares from 120 million shares to 10.9 million shares. The Saudi Stock Exchange completed the process of the company’s capital reduction on Jan. 19.
In the banking sector, shares of SABB fell by 2.61 percent to SR149 and Banque Saudi Fransi by 2.19 percent to SR89 yesterday.
Shares of Saudi Basic Industries Corp. (SABIC) edged higher slightly to SR162.25 yesterday.
In the telecom sector, shares of Saudi Telecom Co. (STC) increased by 0.65 percent to SR76.50, whiles shares of Etihad Etisalat dropped by 2.47 percent to SR69.
The stock market turnover was in excess of SR9.42 billion yesterday.