RIYADH, 19 March 2006 — Saudi shares closed a jittery session 0.15 percent higher yesterday as some investors pocketed profits after two days of sharp rises that followed a strong correction.
The Tadawul All-Share Index (TASI) closed at 16,380.16 points after climbing 4.73 percent in morning trade to 17,130.08 points. Turnover reached SR29 billion ($7.7 billion), nearly 40 percent made by blue chips Saudi Basic Industries Corp. (SABIC), Saudi Electricity Co., Al-Rajhi Bank, Saudi Telecom Co. (STC) and Savola Group.
After ending the morning session 4.26 percent higher, the index had a roller-coaster ride in the afternoon session, losing 0.87 percent before rising more than 2.3 percent and then sliding toward close.
“There was some profit-taking which some big firms tried to resist ... It was healthy as some investors and funds tried to put some balance in their portfolios,” said Mohamed Al-Hoqbani, of Al-Rajhi Bank. “The market should stabilize with less volatility tomorrow.”
The profit-taking focused mainly on blue-chip stocks which had risen sharply over the previous two sessions.
The index rose by nearly the 5 percent limit in the previous two sessions after measures pledged by the government halted a two-week long correction that had slashed its capitalization by more than 30 percent from its peak level in February. “Investors began taking profits because the index has to stabilize at some point,” a senior trader said. “The index cannot continue to rise at this pace (near five percent) for long ... it will have to stabilize in the coming few days as new fundamental factors enter into play,” he added.
Analysts say the announcement of first quarter results in April will provide much need visibility to investors who have grown more aware of the bourse’s high valuation ratios after the correction.
The correction had trimmed the Arab world’s largest bourse capitalization by 31 percent or more than $260 billion over the last two weeks, hurting mainly an estimated 500,000 Saudi investors. It also lowered drastically the bourse’s average PE now standing at around 35.3, more than double that of Kuwait’s bourse.
Hani Baathmane, executive associate at Al-Khabeer Financial Consultancy, said the government announcement has brought some confidence to the market. “Some wonder how long this confidence will last or whether this is justified.”
He said a buoyant economic outlook makes the Saudi bourse an “excellent investment channel over a three- to five-year period”.
“The problem here is abundant liquidity and the strong presence of retail investors and speculators,” he said. He said banks should stop margin lending to retail investors who borrow to invest in the bourse hoping for overnight wealth.
SABIC, which weighs nearly a quarter of the bourse’s total capitalization, led trade and closed 1.79 percent lower at SR1,426 after it rose earlier by nearly five percent limit, bringing its year-to-date performance to minus 8.1 percent.
STC added 2.05 percent to SR945 riyals, Al-Rajhi was up 2.63 percent to SR2,340 riyals and Savola gained 3.25 percent to close at SR1,650. Saudi Electricity fell 4.94 percent to SR154 after rising by as much as 3.7 percent in intraday trade.
Meanwhile, Kuwait and Dubai bourses surged more than 5 percent yesterday, leading a rally on most Gulf Arab markets, which plunged earlier this week in a region-wide correction.
Kuwait’s bourse, the Arab world’s second largest, registered its largest daily gain ever with a 5.18 percent jump to 10,453.80 points.
The Dubai bourse index leapt 8.43 percent to close at 676.12 as key Gulf markets rebounded from steep falls, while in Abu Dhabi the market index climbed 5.89 percent to 4,365.31 points.
Gulf governments talked up the markets with vows to take measures ranging from direct intervention to better regulation to support prices, triggering a region-wide resurgence.
Kuwait, which registered some of its steepest daily declines in about three years this week, surged on hopes that the state would inject fresh funds into the market after a cabinet meeting to discuss ways to shore up prices.
“It is a psychological factor due to the talk of government intervention,” said Jasem Al Sadoun, chairman of Kuwait’s Al Shall Consulting and Investment Co. “It is enough to give investors here the psychological boost that the government will intervene.”
Regional bourses lost steam over the past few weeks after a months-long rally powered by record oil revenues that had made them among the most expensive emerging markets in the world.
Dubai’s bourse registered its highest single-day gain in months after the government said it would restrict the number of initial public offerings to prevent them from draining liquidity in the market and exacerbating sell-offs.
“There has been an increase in optimism as a result of the government meeting and the new rules to restrict IPOs,” said Mohamed Alami of Dubai’s Naeem Brokerage. “Larger investors are going into the market now because it looks like liquidity will not be squeezed again.”
Turnover on Dubai’s bourse surged 69 percent, with 287 million shares worth 2.9 billion dirhams ($789.8 million) changing hands.
Emaar Properties, the United Arab Emirates’ largest listed firm, was the most active stock, jumping 4.97 percent to 16.9 dirhams.
The smaller bourses of Oman, Bahrain, and Qatar were closed on Saturday. Their trading week starts on Sunday.
