JEDDAH, 21 May 2004 — After plunging 5.72 percent on Wednesday and 3.5 percent on Tuesday, Saudi stocks recovered more than four percent yesterday.

The All-Share index closed at 6,031.82 points after a turbulent six days in which saw the market hit a record high of 6,455 points in early trade on Tuesday. A mid-week tumble of 13 percent sent the index crashing below 6,000 points before ending the week with yesterday’s rally.

Small-cap agriculture and services stocks were the biggest losers of the week but their falls were offset by gains in cement, banking and telecommunications stocks.

The index of farming stocks on the electronic exchange fell 16 percent while the service sector was down six percent. Banks gained 1.6 percent and cement firms were up 2.3 percent.

Bakheet Financial Advisors (BFA) of Riyadh said the shift toward blue chips from the small-caps, which had attracted waves of speculative buying earlier this year, would continue next week.

“After the sharp and volatile trading for the week, BFA expects investors to revaluate their Saudi Electricity Co. (SEC) and speculative stock positions and turn to more stable blue chip stocks,” BFA said in a report.

SEC has attracted heavy speculative buying and is up 59 percent so far this year. The market as a whole has climbed 35 percent in 2004 following on from last year’s rise of 76 percent.

Weekly turnover of SR65.2 billion was close to last week’s record of SR66.95 billion. Falling shares outnumbered gainers by 51 to 19.

Reacting to the earlier plunge in the market, Dr. Abdulwahab S. Abu-Dahesh, senior economist and head of Investment Research at Riyad Bank, said that: “The lesson here is that people have to follow the fundamentals of the market. I believe that these will come back to play a role as we wait for the first half results of companies.” He added that the volatility in the stock market was due to recent announcements about profitability, dividends and capital increase of some small and medium-sized enterprises (SMEs).

“A correction has happened. It was natural,” said Abu-Dahesh.

Basil Ghalayini, CEO of BMG Financial Advisers, told Arab News that some banks are increasing the margin trading of their clients. Traders have more cash to play with which is creating a stock rally. “Sentiments and psychology, rather than fundamentals, are playing their role in the stock market swings,” Ghalayini said.

Sankar Kailasam, senior analyst at the Riyadh-based Consulting Center for Finance and Investment said, “The Saudi stock market lost 570 points in two days’ trading on Tuesday and Wednesday. A total of SR77 billion ($20.5 billion) in market capital was wiped out.”

He added that this year’s turnover had already surpassed SR611 billion, more than the turnover of 2003, which was SR596.5 billion. Some companies that reported financial losses in the past few years, which partially ate into their shareholders’ equity, are fetching high prices. This shows the lack of awareness among investors in their stock selection.

Meanwhile, the Kuwaiti stock market recovered sharply while the Qatari bourse plunged in a week of mixed trading on Middle East exchanges.

Kuwait’s KSE index ended the week Wednesday by pushing through the 5,000-point ceiling, ending up 3.3 percent at 5,119.40.

Qatar’s CBQ index fell 40 points, dropping below the 1,000-point threshold to 995.34. For its part, Oman’s MSM index picked up 2.3 percent to 315.15 points, the second-largest gain in the region.

The NBAD index in the United Arab Emirates put on 1.6 percent to 5,024.57 points, while Bahrain’s BSE added 1.7 percent to 2,488.87.

The Egyptian market, hit by profit-taking during most of the week, recovered on the final day of trade yesterday. The HFI index rose 1.5 percent to 15,481.00 points.

The Palestinian Al-Quds index inched up 0.1 percent to 173.19. In Beirut, the BSI shed 1.7 percent to 548.22 points, while the Tehran bourse dropped 0.6 percent to 11,504.77. The ASE in Amman also shed 0.6 percent, ending at 2,732.10 points. — Additional input from agencies