JEDDAH/DUBAI: Saudi bank and petrochemical stocks tumbled on Sunday following sharp declines in second quarter profits, dragging Saudi Arabia’s index to its largest one-day fall for two weeks.
Most other Gulf Arab markets retreated as earnings from Saudi Basic Industries Corp. (SABIC) soured sentiment across the region.
“SABIC’s results were in line with our expectations because although prices have improved, volumes have fallen quarter-on-quarter,” said Keith Edwards, head of asset management at Doha-based investment company The First Investor.
“The world economy is not showing any great signs of recovery and so one can’t expect SABIC to have recovered either — it’s a global cyclical company.”
Rival Saudi International Petrochemical Co. (Sipchem) dropped 7.1 percent after its quarterly profit plunged 99.6 percent.
Bank stocks also suffered after Saudi Hollandi Bank reported a 72 percent drop in second quarter earnings, markedly below two analysts’ forecasts. Its shares fell 4.8 percent.
“Saudi Hollandi’s profit fell dramatically on provisions and it is known for its conservative attitude and so tends to take forward provisions rather than wait until after the event,” said Edwards. “So there are clearly problems in the banking sector.”
Edwards said he expects provisions at other Saudi financial institutions to increase in the third quarter as the scale of potential losses at struggling Saudi conglomerates Saad Group and Ahmad Hamad Algosaibi & Bros becomes clearer.
The pair are restructuring billions of dollars of debts. On Wednesday, Algosaibi filed a lawsuit in New York against Maan Al-Sanea, the head of the Saad Group, in a case involving allegations of $10 billion in loan irregularities, according to court documents.
Saudi Arabia’s Tadawul All-Shares Index (TASI) fell 1.7 percent to 5,675.95 on Sunday with 3 of the 15 sectors coming to a close with a positive change of 0.17 percent, 0.71 percent and 1.11 percent respectively in the Cement, Transport and Telecom sectors. Otherwise, sector losses ranged from 0.25 percent in Retail to 5.09 percent in the Petrochemical Industries sector, with a relatively steady liquidity since Saturday, coming in at SR5.97 billion, the Jeddah-based Financial Transaction House (FTH) said in its market commentary on Sunday.
The Kuwait and Qatar benchmarks both declined for the first time in four sessions, slipping 0.5 and 0.4 percent respectively. Bahrain fell for the six session in seven, slumping to a fresh two-year low. The Kuwaiti index closed at 7,544 points. The Qatar stock index slipped 0.4 percent to 6,363 points.
Banks were the main drag in Doha, with Al-Khaliji Bank dropping 2.4 percent and Qatar International Islamic Bank losing 4 percent.
“There isn’t any positive news to build momentum and so we’re seeing a continuation of the profit-taking that started on Thursday,” said Osama Rayyan, chief dealer at Dlala Brokerage & Investment Holding.
“Volumes will continue to be low ahead of the listing of Vodafone Qatar on Wednesday. The stock will not have any trading limits on its first day and so investors are keeping cash for its debut.”
Oman’s index climbed 2.6 percent, its largest daily gain in 10 weeks, with Bank Muscat rising 6.3 percent.“People were worried about banks’ second-quarter results, but these were okay and they took out huge provisions,” said Adel Nasr, United Securities brokerage manager.
“If the economy continues to rebound then we believe their third-quarter results will be extremely good and they won’t be forced to take any more provisions. So people are optimistic and there’s huge interest from Gulf and local investors.”
Egypt’s benchmark was another to buck the negative trend, rising 1 percent after several Egyptian GDR shares ended higher in London on Friday. Orascom Construction Industries added 0.2 percent, after its London-listed shares gained 1.3 percent on Friday.
— With input from agencies