JEDDAH, 26 December 2005 — The Saudi stock market seems to be undergoing a minor correction at the year’s end after a relentless surge throughout 2005. The Tadawul All-Share Index (TASI) closed 92.86 points down to close at 16,611.99, but it is still higher by 102.43 percent from the start of the year. The index hit an all-time high of 16,988.08 on Dec. 15. It seems that investors are opting for profit-taking as 2006 approaches.
Faisal H. Alsayrafi, president and CEO of Financial Transaction House, said the number of investors in the Saudi stock market had exceeded 3.5 million. “This figure itself speaks a lot about the attraction of Saudi stock market,” he said. However, he pointed out that fluctuations and speculations had reduced confidence of certain joint stock companies in the market. He said the obvious fluctuations in prices were caused by investors themselves as they acted upon unofficial information.
The major Banking, Industrial, Services, Telecom and Insurance indices were down, while Cement, Electricity and Agriculture indices went up yesterday.
Bishah Agriculture shares soared 9.99 percent to SR883.25, followed by Filling & Packaging Materials Manufacturing Co. (FIPCO) by 9.97 percent to SR684, the National Shipping Company of Saudi Arabia by 5.44 percent to SR504, Food Products Co. by 5.27 percent to SR289.75 and Tabuk Cement by 5.19 percent to SR648.
However, shares of Saudi Arabia Refineries Co. (SARCO) continued to plunge yesterday. Its shares closed 10 percent down to SR4,060.50 yesterday. Aseer Trading, Tourism & Manufacturing Co. shares also fell 10 percent to SR1,348.25 and Savola Group by 4.60 percent to SR1,391.
Saudi Electricity Co. shares were most active by value as SR2.73 billion worth of shares changed hands yesterday. Its shares closed at SR142.50.
Bank stocks showed mixed performance.
In the industrial sector, shares of the bellwether Saudi Basic Industries Corp. (SABIC) continued to drop yesterday. SABIC shares closed 1.02 percent lower to SR1,578.75.
Shares of Saudi Telecom Co. (STC) and Etihad Etisalat fell to SR923 and SR707, respectively.
Out of 77 shares traded 31 were up while 45 were down. The value of shares traded reached SR27.68 billion yesterday.
Meanwhile, addressing the fourth Gulf Cooperation Council (GCC) economic summit in Dubai last week, Habib Al-Mulla, chairman, Dubai Financial Services Authority (DFSA), said to ensure GCC bourses can participate in global stock markets and maintain their uniqueness, valuation of listed companies must be based on their performance. He said the overall objective of GCC bourses should be to balance investor interests and market buoyancy with an emphasis on greater transparency, strong regulatory controls and investor education. Stock market performance is supported by a number of factors, such as liquidity, company performance and increased and diverse investor participation. A single long-term development strategy for its bourses does not exist at present in the GCC.
“Though local markets are registering strong growth values and providing positive returns, it remains to be seen whether current valuations can be justified in the long term. Listed companies are using the strong market sentiments to access funds as traditional measures of company valuations like price-to-earnings ratios are high in the local market. These ratios are generally the primary drivers of company valuations at a micro economic level,” Al-Mulla said.
The DFSA stipulates that banks and other financial firms in its jurisdiction are subject to controls over lending and monitors trading practices for misconduct. Listed companies are required to make proper and timely disclosures and report audited financial accounts.
The DFSA supports this with internal supervisory and investigative processes and participation in broader investor education initiatives.