JEDDAH, 2 April 2005 — The Saudi stock market witnessed a major correction at the end of the weekly trade on Thursday as the market lost 354.68 points when it closed at 10,499.26 points. Most of the setback took place within 13 minutes of the two-hour trading from 10 to 12 a.m.
The exchange of stocks on Thursday showed that the market was mentally ready for the correction after reaching record highs in the past weeks.
Saudi shares fell 3.27 percent after a sell-off in industrial stocks which brokers said was triggered by an investigation by market regulators into a refining company. The industrial sector alone lost 1,885.42 points.
The Capital Market Authority (CMA) said on the Saudi bourse website it had been examining Saudi Arabian Refining Co. and published a statement from the company which revealed shareholder dissatisfaction over the firm’s investments.
The refinery firm’s shares closed down the maximum 10 percent at SR1,394. Other industrial stocks fell too, including market giant Saudi Basic Industries Corp. (SABIC), which was down 6.5 percent to SR1,610.
The petrochemical producer accounts for around one third of total market capitalization on the Arab world’s biggest exchange, which has been on a two-year bull run fueled by high oil prices.
“Shares in the (refining) company fell to the limit after the announcement so some investors in the sector panicked and dumped their stock,” said Bishr Bakheet of Bakheet Financial Advisors.
Other market watchers said the fall was expected and had little to do with the CMA announcement. “This is just a correction. The market has gone a long time without one, so we were expecting it,” a dealer with a leading bank in Saudi Arabia said.
Arab stock markets are expected to surge further in the coming couple of weeks ahead of announcing balance sheets for the first quarter of the year, analysts said yesterday..
“Following downward corrections that dominated markets over the past few days, we believe stock markets are set to rebound anew in anticipation of good results for the first quarter of 2005,” Wajdi Makhamreh, investment manager and head of brokerage at the Jordan Investment & Finance Bank, told Arab News.
“The upward trend will find support from growing regional liquidity seeking investment outlets,” he said.
Makhamreh belittled the impact on stocks of this week’s hike of interest rates by central banks in Jordan, Kuwait and other Arab countries to cope with the rising rates on the US dollar. “We believe such moves will not have any tangible effect on Arab bourses, because interest rates are still very low,” he said.
The all-share index of the Amman Stock Exchange gained 2.01 percent in the week ending Thursday to close at 5,514 points, up from 5,406 points last week, according to the ASE weekly report.
Kuwaiti stocks also kept up their upward drive this week, making benefit from optimistic Q1 expectations and the Gulf liquidity pouring into the market in search of investment opportunities, dealers said.
The KSE all-share price index gained 0.7 percent, closing at 7,869.1 points and coming near to the psychological barrier of 7,900 points.
Egyptian shares also continued their downward journey this week as investors were involved in strong profit-taking tactics for the third week in a row.
The Hermes all-share price index shed 4.02 percent this week, closing at 34,077 points, down from 35,505 points last week. However, Egyptian stocks managed to recover some of their losses on Thursday, when the benchmark price climbed 4.3 percent after falling earlier to as low as 32,650 points. — With input from Abdul Jalil Mustafa