JEDDAH, 12 June 2007 — The Saudi stock market tumbled 2.75 percent yesterday as investors dumped stocks to prepare for the launch of several upcoming initial public offerings. The continuing IPO of Jabal Omar Development Co., which opened for subscription on Saturday, also contributed to the fall as it attracted huge investment in just three days of its opening. The company offers 201 million shares or 30 percent of the total to Saudis at the rate of SR10 per share.
The Tadawul All-Share Index plunged 203.16 points to 7,172.57 yesterday, inching closer to 7,000 mark.
All the traded stocks fell yesterday in market turnover of SR6.32 billion. The industrial, services and agriculture indices suffered badly yesterday. The Industrial Index dropped by 3.67 percent, Services by 4.38 percent and Agriculture Index by 5.20 percent.
Shares of Saudi Basic Industries Corp. (SABIC) declined 3.73 percent to SR116.
In the insurance sector, shares of the National Company for Cooperative Insurance (NCCI) fell 1.70 percent, Malath Insurance by 3.17 percent and the Mediterranean & Gulf Insurance & Reinsurance Co. (MedGulf) by 5.71 percent yesterday.
In the telecom sector, shares of Saudi Telecom Co. (STC) dropped slightly over 2 percent and Etihad Etisalat by 0.50 percent yesterday.
The agriculture sector also suffered heavy losses as shares of most of the companies dropped sharply yesterday.
Dr. Mohamed Ramady, visiting associate professor at King Fahd University of Petroleum and Minerals, Dhahran, told Arab News that yesterday’s sharp fall and the continuing erratic behavior of the Saudi stock market is not surprising, given the underlying factors affecting market sentiment.
“The Saudi investor does not yet exist in the true sense of stock picking based on fundamentals, and technical analysis, and then adopting a long term attitude. What we are now witnessing, and have been witnessing since the beginning of the year, is pure intra-day speculation, whether by small or large investors. Make a profit and run seems to be the order of the day — who then would stay in the face of the exit stampede?”
According to Ramady, the fall of the Tadawul Index to April 2007 lows, has also been affected by the impending mega IPO’s of Kingdom Holding Co., and others in the pipeline, which is making some current investors liquidate to buy new shares, although the margin of making huge first day profits will be greatly reduced due to book-building pricing that is now being introduced in the Saudi IPO market.
“Still, the Saudi investor is riding a market sentiment tiger, or more appropriately, the tiger’s tail, as evidenced by the whip-lash the market saw over the past few weeks, either in trying to break the psychological upward barrier of 7,900 or the downward barrier of 7,100. What is more surprising though, is that the market falls have been across the board, and have taken in blue chip sectors such as banking and insurance. This is the surprise, given that the Saudi insurance sector was not affected to any large extent by the hurricane damage and claims in Oman, and remains one of the most promising sectors in the Kingdom. Regional tensions and the war of words between the US and Iran have also been contributing factors.”
Ramady said: “The Saudi Tadawul Index will not be stable for a long time to come until the investment philosophy changes to one of ‘invest and forget.”