JEDDAH, 17 May 2006 — The Saudi stock market plunged yesterday after three days of successive gains following Custodian of the Two Holy Mosques King Abdullah’s appointment of Abdul Rahman Al-Tuwaijeri, secretary-general of the Supreme Economic Council (SEC), as acting chief of the Capital Market Authority (CMA).
The Tadawul All-Share Index (TASI) declined 1,095.58 points or 9.24 percent to 10,764.28 yesterday. Out of 80 companies traded, shares of only four companies — Al-Ahsa Development Co., the Qassim Cement Co., Saudi Real Estate Co. and Tihama Advertising and Public Relations Co. — rose, while shares of all other companies declined.
The stock market turnover also fell to SR16.33 billion from SR19.52 billion on Monday.
Mohamed Ramady, professor at King Fahd University of Petroleum and Minerals (KFUPM), told Arab News: “The euphoria following the exit of CMA head Jammaz Al-Suhaimi did not last long, as was evidenced by the sharp fall of nearly 10 percent in the stock market index.
“Fluctuations of this magnitude — whether positive or negative — are not conducive to a settled stock market and indicate acute investor uncertainty and lack of confidence, with the small investor wondering in which direction to go. Small investors, it seems, are clutching at any straw to steady their nerves, despite quite reasonable company price fundamentals and blue chip bargains out there in the market.”
Ramady added that “the comments to journalists by King Abdullah that a study is under way to set up a government managed investment fund that would allow small investors to place up to SR500,000 for two years, with the investment capital being guaranteed, offers a glimmer of hope to the battered small investors who are now desperately seeking long-term safer returns.”
Such a move, according to Ramady, would bring a small measure of relief and stability to the market, and help to expose large-scale market manipulators. Until then, he said, “the Saudi investor is in for quite a long haul of witnessing erratic cross market daily volatility.”