RIYADH, 28 May 2006 — Saudi shares closed 2 percent lower yesterday on sliding blue chips as investors focused on small-caps, hoping for quick profits after a recent market crash.
The Tadawul All-Share Index (TASI) ended at 10,173.28 points, down 2.04 percent on turnover of SR15.51 billion ($4.14 billion) and volume of 278.3 million shares, mostly small-cap stocks. Decliners led advancers 59 to 18.
Traders said the market was back to speculative dealings blamed for a crash that erased more than half of the value of largest Arab bourse since late February.
The market had earlier rallied more than 600 percent in three years, as investors with little market knowledge but abundant cash sought paper of any quality in the hope of quick profit. “All the stocks that rose today were of speculative grade. They shattered the homes of tens of thousands of people during the crash, but now (these stocks) are perceived as better buys than blue chips,” a senior trader said.
“Some of these stocks were trading at PEs of 1,000 plus, even multiple of 10,000s. People like them now because there is a total lack of visibility on what will happen next,” he added.
Industrial firm FIPCO rose 4.9 percent to SR181.00, topping the trade with a SR1 billion turnover. It trades at a price to 2005 earnings ratio of 122.
The trading pattern reflects, however, a wait-and-see attitude by “smart money” after the crash which analysts say was a belated correction worsened by a power struggle between the bourse regulatory body CMA and major speculators.
Among heavyweights, Saudi Basic Industries Corp. (SABIC) fell 2.1 percent to SR128.50, Saudi Telecom Co. inched down 0.24 percent to SR103 and Saudi Electricity Co. shed 1.49 percent to SR16.50. The biggest-listed bank, Al-Rajhi, fell 3.62 percent to SR226.50.