JEDDAH, 14 May 2006 — The stock market reacted positively yesterday after Saudi Arabia appointed Abdul Rahman Al-Tuwaijeri, secretary-general of the Supreme Economic Council (SEC), as acting chief of the Capital Market Authority (CMA). He replaced Jammaz Al-Suhaimi.
The Tadawul All-Share Index (TASI) broke the 11,000-point psychological barrier to reach 11,036.02 points, up 9.85 percent or 989.19 points on Thursday’s close. The TASI is still 34 percent below its end-2005 close and down 46.5 percent on its all-time high of 20,634 points set on Feb. 25.
The surge in the stock market was led by the major banking and industrial indexes. The Banking Index jumped over 3,000 points to 33,386.26 and the Industrial Index rose 1,970.50 points to 22,042.71.
Custodian of the Two Holy Mosques King Abdullah decided Friday to replace Suhaimi after the index dropped to a 14-month low.
Mohamed Ramady, professor at King Fahd University of Petroleum and Minerals (KFUPM), told Arab News the more important issue is how the CMA is managed rather than personalities. “Suhaimi tried his best to bring about a more rigorous and transparent regime at the CMA, and this could have upset many people who seem to blame him for the recent stock market crash. This has nothing to do with Suhaimi, but a fundamental correction in over-inflated prices, not just in Saudi Arabia, but in all the Gulf stock markets. What is more important in the long term is that both domestic and international investors see a tougher regulatory and supervisory regime in place at the CMA to produce a sustained confidence in the market; otherwise the euphoria following the exit of Jammaz Al-Suhaimi will soon dissipate,” Ramady said.
“What happened today is certainly a psychological reaction to the appointment. It was desperately needed by the market, which has lost almost half of its value in three months,” financial analyst Nabil Al-Mubarak said. “There was general dissatisfaction among traders about recent measures adopted by the outgoing chief,” Mubarak added.
In his first comments after the appointment, Al-Tuwaijeri vowed to work to restore confidence to the sagging bourse, saying that market performance did not reflect the Kingdom’s strong economic indicators.
The Saudi market, the largest in the Arab world, shed 21.1 percent in the week ending Thursday as investor confidence hit rock bottom. The market also shed some $350 billion of its peak value of about $800 billion in late February.
“I think that the new appointment is an attempt to restore confidence to the market. It was not a result of mistakes by the former chief,” said Mohammad Al-Dahayan, head of Dahayan Financial Consultants. “The former chief applied strict supervision regulations that angered leading investors,” who were reported to have shunned the market, draining liquidity as a result, Dahayan added.
The surge in the Saudi stock market directly influenced other Gulf markets, especially two in the United Arab Emirates. Dubai Financial Market Index cruised past the 500-point psychological barrier to close trading at 507.79 points, up 9.4 percent on Thursday’s close, spurred by market leader Emaar which rose 10.8 percent.
The market is still 50.2 percent below last year’s close and down 61 percent on its all-time high of 1,302.69 points set in August.
Abu Dhabi Securities Market also increased 6.55 percent to close at 3,492.40 points. But it is still down 32.9 percent on 2005 close and 45.5 percent on its all-time high. Only Kuwait Stock Exchange dropped slightly by 0.7 percent to close at 9,587.40 points, a seven-month low.
— Additional input from Agence France Presse
