JEDDAH, 4 December 2006 — The Saudi stock market tumbled to a new low yesterday as the Tadawul All-Share Index (TASI) closed below 8,000 points. The index was down 492.79 points or 6.04 percent to 7,665.73, its lowest close since late 2004.
After closing at 16,712.64 points on Dec. 31. 2005, the Saudi stock index reached an all-time high of 20,634.86 points on Feb. 25 this year. The index is down 54.13 percent so far this year. All 84 traded stocks were in negative territory yesterday. The stock market turnover was also meager at SR5.22 billion.
The most active by value was Saudi Basic Industries Corp. (SABIC) as its shares closed 3.37 percent down to SR100.25.
Abdullah Al-Suwailemi, director general of Tadawul, said his organization would apply advanced systems to uncover malpractices in the stock market. “We are also planning to provide additional safeguards to the existing system,” he said at an investment conference in Riyadh.
Banking stocks also suffered badly. Riyad Bank shares plunged 9.82 percent to SR62, while Al-Rajhi Bank shares closed 9.16 percent down to SR178.50. SABB shares also fell 9.12 percent to close at SR127.
Hamad Al-Sayari, governor of Saudi Arabian Monetary Agency (SAMA), said that the application of Basel-II standards would be applied to Saudi banks from the beginning of next year and would meet demands from all local banks to tackle all risks related to credit, capital market and other operational risks. While delivering a speech in Riyadh yesterday, the governor clarified that the promising economic climate witnessed by the Kingdom has raised the investors’ keenness to participate and benefit from investment opportunities in the Saudi economy, pointing to the increase in the gross domestic product by 6.5 percent for 2005 which increases the production capacity of the national economy.
Saudi Electricity Co. (SEC) shares dived 9.62 percent to SR11.75. In the telecom sector, shares of Saudi Telecom Co. (STC) and Etihad Etisalat dropped 1.72 percent and 5.36 percent, respectively.
Mohamed Ramady, professor at King Fahd University of Petroleum and Minerals, told Arab News there was no economic or financial justification for the massive one day fall seen yesterday. “One had hoped that the market was at last registering some stability, with the index fluctuating narrowly between the levels of 8,300 and 8,600 over the past two weeks, but today’s sharp fall has no basis now in terms of current price-earning ratios, dividend yield or book value to market price evaluations. The Saudi market is definitely underpriced today. Continuing market rumors and small investor uncertainties are the major reasons for the sharp falls,” Ramady said.
“There is a hint of speculative selling by some investors to try and buy back and gain from yearend last-minute rallies when dividends are announced. This is causing nervousness. The key once again is investor education and to take a long-term investment viewpoint, but the Saudi stock market is not performing by any rational standards these days, except a panic herd mentality,” he added.
According to a report released by Tadawul yesterday, at the end of November 2006 TASI closed 14.3 percent lower to a level of 8, 324.43 points compared to 9,717.89 points at the end of October 2006.