JEDDAH, 7 March 2006 — After investors lost faith in the Saudi Stock Market (Tadawul) following the sharp decrease in share prices last week, the market rebounded robustly for the second consecutive day yesterday restoring expectations.
The market that had witnessed a correction and large sell-offs recently leveled off from the drop cycle when small investors desisted from sell-offs. For a few days large investors withheld stock purchases, thus pressuring small investors to sell, pushing down stock prices.
The market picked up after the resistance of the small investors as the Saudi All-Share Index (TASI) closed yesterday (near its maximum 5-percent band) 4.79 percent higher at 18,838.87. The index made most of the gains in the morning as it added 580.33 points followed by another 280.19 in the evening, adding a total of 860.52 points yesterday.
The market recovered after the confidence of the small investors was restored due to the strong financial results of many Saudi companies for 2005 that were released in the last three days. Most of the companies reported strong results and sharp increases in their net profits. Even for companies that reported negative results some showed decreases in their net loses.
The trading in the morning session was influenced by wise investment decisions as the shares of all profitable and performing companies increased while those of non-performing and losing companies fell. In the evening, nevertheless, the prices of speculative stocks increased and some went from losers to most active by value or volume.
In yesterday’s morning session, all the indexes went green, led by the Banking, Industrial and Cement, except the Agricultural Index, which edged lower to 9,117.06. However, all the indexes went green in the evening session as the Agricultural Index went up 3.02 percent to 9,545.15. The raise in the Agricultural Index in the evening was triggered by the restoration of the investors’ confidence in the market and not by the performance of the companies in the sector.
Industrial and Banking indexes continued to climb from Sunday as they closed at 44,291.44 and 47,038.55, respectively. The Industrial Index gained 2,030.90 points or 4.81 percent, and the Banking Index added 2,108.73 points or 4.69 percent in yesterday’s trading.
The recent positive financial results that were reported by many companies in the industrial sector were the main driving force behind the index climb. Blue chip companies such as SISCO, Pharmaceutical (SPIMACO) and Saudi Cables reported increases in net profits for 2005.
The cement sector recovered strongly yesterday, as investors were attracted to the strong financial results of companies in the sectors. Most of the gains, however, were made during the morning session when the Cement Index increased by 515.20 points or 4.54 percent to 11,873.93. In the evening, the index added only 48.15 points to close at 11,922.08 with all the companies’ shares in the green.
Following the announcement of Arab Cement on Sunday that the company was to distribute SR12 per share in dividends, its share price jumped 4.93 percent higher to close at SR957 yesterday. Yanbu Cement shares went up SR33 or 4.98 at SR695 after the company reported on Sunday that it made SR453.5 million in net profits in 2005 compared to SR427 million in 2004. Tabuk Cement announced on Sunday that its dividends for 2005 are to be SR10 per share. The news sent Tabuk Cement shares 4.96 percent higher to SR614.
Shares of the Saudi Electricity Company (SEC), the sole company in the sector, went 4.97 percent higher to push the Electrical Index by the same percentage, closing at 3,877.63 .
The Insurance Index jumped 110.97 or 4.94 percent in the evening to close at 2,358.08 yesterday. The index benefited from the strong financial results of NCCI, the only company listed on the index, which reported that it is going to distribute SR30 per share for its shareholders as profit for 2005.