JEDDAH, 3 May 2006 — The Saudi Arabian Monetary Agency (SAMA) on Monday refuted as “baseless” press reports that banks had frozen or liquidated the funds of 100,000 clients during the stock market crash of the past few weeks. A local newspaper said earlier this week that some people had complained to SAMA that banks had frozen their accounts on the expectation that they would go bankrupt as stock prices tumbled.
“What some media outlets circulated about banks liquidating 100,000 medium-size portfolios that had acquired loans worth SR18 billion ($4.80 billion) is baseless,” SPA said quoting a statement by SAMA.
However, the agency confirmed that banks had liquidated 396 portfolios worth a total of SR987 million ($263.2 million) since the start of the correction on Feb. 26.
Hamad Al-Sayari, governor of SAMA, said the amount (SR987 million) represented only one thousandth of the total value of stock exchanges (SR760 billion) during that period. “Liquidation of investment portfolios is carried out upon direct decisions by clients and in line with their agreements with banks,” the SAMA statement said. Al-Sayari said his organization had opened an investigation to make sure that banks do not commit such violations against clients. “We have not seen any increase in complaints from citizens during the last two months,” he added.
He estimated the total number of medium-size portfolios at all the Saudi banks at less than 2,500, adding that the lion’s share of their investments goes to major businessmen.
Stock brokers said banks were known to have moved against leveraged clients during the crash but that some of the complaints made to SAMA accused banks of failing to inform clients of margin calls. The Saudi stock market has seen two sharp corrections since late February, hitting millions of ordinary Saudis who invested money in equities during the bull market of the last three years.
Saudi stocks, however, dropped 3.11 percent yesterday after rising 2.87 percent on Monday. The Tadawul All-Share Index (TASI) plunged 416.92 points at 13,000.64. Only Services and Agriculture indexes were higher, while all other indexes edged lower yesterday. The Industrial index bore the brunt with over 1,000 points fall at 27,664.88 yesterday as shares of petrochemical giant Saudi Basic Industries Corp. (SABIC) dropped 4.27 percent to close at SR185. Shares of other major companies in the industrial sector such as Saudi Arabia Fertilizers Co., National Industrialization Co., National Gypsum Co., Al-Ahsa Development Co., Savola Group, Almarai Co. and Zamil Industrial Investment Co. were in the red yesterday. While shares of National Gas & Industrialization Co., Food Products Co., National Metal Manufacturing and Casting Co., Nama Chemicals Co. and Saudia Dairy & Foodstuff Co. made hefty gains yesterday.
The Banking index dropped 940.80 points to 38,063.06 as shares of banks fell yesterday. Shares of all listed cement companies declined, while shares of agriculture firms rose yesterday. The Saudi Electricity Co. (SEC) shares declined 4.88 percent to SR19.50. In the telecom sector, shares of Saudi Telecom Co. (STC) fell 3.40 percent to SR128 and Etihad Etisalat by 5.01 percent to SR90 yesterday. The Insurance index was down as shares of the National Company for Cooperative Insurance (NCCI) edged lower by 5.71 percent to SR153.75.
