JEDDAH: Fears of a world economic slowdown and a further fall in the price of crude oil continued to haunt the Saudi stock market. It lost more than 9 percent of its value yesterday and closed at its lowest level in almost five years.
The New York benchmark contract for light sweet crude for January delivery dropped as low as $48.25 a barrel on Friday, less than one third of the benchmark’s record highs above $147 in July. Both light sweet crude and Brent North Sea crude fell below $50 on Friday when the Saudi market is closed.
The Tadawul All-Share Index (TASI) plunged 9.2 percent to 4,431.57 points, the lowest since January 2004, with all sectors ending in the red.
The slide in the largest Arab bourse, the only stock market to operate on Saturday, brings its losses this year to 60 percent. TASI ended last week’s trading down 11 percent. It has shed almost 20 percent in the past two weeks.
Out of 125 stocks traded, 124 companies suffered falls while the lone gainer was Malath Cooperative Insurance and Reinsurance Company.
The stock market turnover was SR4.18 billion yesterday compared to SR24.40 billion last week.
Confidence in the Saudi market, as in other Gulf bourses, appears to be faltering due to investors’ fears that the impact of the global financial meltdown on their respective economies is not yet over.
The seven bourses of the region have shed about $350 billion of their market value in the past seven weeks and as much as half-a-trillion dollars since the beginning of the year. Governments, meanwhile, are coming to the rescue of the slumping markets with both Kuwait and Oman setting up special funds to buy stocks.
The leading Saudi petrochemicals and banking sectors slid 9.85 percent and 9.10 percent respectively, while telecoms plunged 9.90 percent. The hotel and tourism sector was down 9.87 percent, media and publishing 9.75 percent, cement 9.67 percent and building and construction 9.47 percent.
“The worst is yet to come ... In today’s (Saturday’s) market action, we saw a drop of nearly 10 percent among most sectors with a fair amount of liquidity respectively. This may indicate that we have seen a bottom (short term) or are very close to reaching it. In any case, trying to catch a falling knife has always proved to be risky, while avoiding the market continues to be the best strategy unless we see sure signs indicating otherwise,” Faisal Alsayrafi, managing director and CEO of Financial Transaction House Co. (FTH), said.
However, John Sfakianakis, chief economist at SABB (The Saudi British Bank), said yesterday’s acute slide can be attributed to the fear factor, which is not unique to Saudi Arabia. Global markets move on fear and volatility is excessive and descriptive of current trends.
“Critical levels were also broken, which brought additional sell offs. The market’s sell offs were done within a short period in the morning trading session with low volumes and more sellers than buyers,” Sfakianakis said.
The malaise felt by the world’s largest bank, Citigroup, extended to both Kingdom Holding Co. whose stock ended at an all-time low of SR4.2, down 9.67 percent from Wednesday’s close and to Samba Financial Group which slumped 9.65 percent.
On Thursday, Prince Alwaleed bin Talal, chairman of Kingdom Holding Co., said he planned to increase his stake in Citigroup to 5 percent from less than 4 percent. The bank’s largest individual investor called Citigroup’s shares “dramatically undervalued.”
Many companies closed down 10 percent — the maximum allowed daily price change — while most other shares lost more than 9 percent of their value. SABB and Arab National Bank shares plunged 10 percent yesterday. Al-Rajhi Bank shares were down by 9.90 percent to SR50.
The petrochemicals giant, Saudi Basic Industries Corp. (SABIC), closed the day down 9.89 percent at SR44.60, while the main telecoms operator, Saudi Telecom Co., fell 10 percent. Shares in Etihad Etisalat mobile phone company were also down 9.88 percent and Mobile Telecommunications Company Saudi Arabia were lower by 9.66 percent.
According to Merrill Lynch’s survey of fund managers for November, investors remain unconvinced that a spate of policy measures from governments and central banks can combat global recession, and are retaining defensive positions.
The survey shows that four out of five investors believe that the world will continue to experience recession over the coming year. Policymakers have offered fiscal stimulus packages, liquidity and interest rate cuts, but investors are not yet ready to give their policies the benefit of the doubt. Forty percent of the panel still believes that monetary policy is “too restrictive” and asset allocators remain overweight cash and bonds relative to equities.
— With input from agencies