JEDDAH, 28 March 2006 — Saudi stocks rebounded after the Capital Market Authority (CMA) made announcements of share-splitting and increasing the fluctuation band yesterday.
After announcing last week that it has presented a proposal to Custodian of the Two Holy Mosques King Abdullah changing the nominal value of shares of all joint-stock companies listed in Tadawul from SR50 to SR10, the CMA yesterday announced the process for implementing the share splitting of five shares to one. It will be implemented in stages based on the number of shareholders in these companies and in accordance of CMA regulations that allows it to suspend market activity for a period of no more than one day while taking into consideration not to halt investors’ interests by minimizing the number of days for suspending the market activity.
The Tadawul All-Share Index jumped 601.80 points or 4.03 percent to close yesterday at 15,547.79 after dropping below 15,000 points on Sunday.
Out of 79 companies traded, 50 went up while shares of 29 companies declined. The market turnover also increased to SR15.93 billion compared to SR10.49 billion on Sunday.
Starting April 1 and until April 22, the splitting will take place as follows: trading of the split shares of companies in the agriculture, insurance and services sector companies will begin Saturday and the market will be suspended on March 30 to complete the necessary technical arrangements for that. The next sector is banking and communication starting trade in the split shares of those companies on April 10 and the market will be suspended Thursday April 8 to arrange for that. Then it is the industrial, cement and electricity sector starting trade in the split shares of those companies on April 15 and the market will be suspended on April 13 for that; and finally trading in Yanbu National Petrochemical Co. (Yansab’s) split shares begins on April 24 and the market will be suspended on April 22 to complete the arrangements for that.
Commerce and Industry Minister Dr. Hashim Yamani said the decision reducing the share value would not affect ownership of investors. “This decision was taken to allow small investors to participate in the general assembly meetings of companies,” he said. An investor should have at least 20 shares to participate in such meetings. He said an investor holding 100 shares with a market value of SR15,000 will have now 500 shares with the same value. The CMA also announced yesterday that it would go back to allowing a 10 percent fluctuation in the market after it has previously brought it down to 5 percent in order to reduce risk. But after recent correction in the market which reduced these risks and the Council of Ministers’ approval of reducing the nominal share value of all companies from SR50 to SR10, the CMA decided that it will increase the daily allowed fluctuation of the companies shares to 10 percent starting Saturday and allow orders of buying and selling in riyal fractions on the same day.
“These decisions would encourage locals and foreigners, especially small investors, to enter the stock market,” said Faisal H. Alsayrafi, president and CEO of Financial Transaction House, regarding the splitting of the shares. “It will also encourage family businesses and small and medium establishments to go public because they will be able to meet CMA requirements and it will increase the number of investors who can participate in IPOs,” he told Arab News.
