JEDDAH/AMMAN, 18 November 2006 — Saudi stocks fluctuated violently last week that started with a dramatic dive caused by a weak demand and selling pressures.
The Tadawul All-Share Index (TASI) sank nearly 5 percent at the start of the week, but recovered later to close at 8,400.88 points on Wednesday, which represents a 0.31 percent or 26.34 points decline relative to last week’s close at 8,427.22 points.
After falling over 408 points last Saturday, the index recovered by 643.36 points the next day but dropped again by nearly 300 points on Monday. TASI dropped by nearly 5 percent again on Tuesday but on Wednesday it recovered by over 375 points.
TASI is currently about 50 percent lower than the year’s start.
“Unfortunately, the Saudi stock market has turned into a behavioral investment reaction rather than a rational one, with anxious daily traders becoming obsessed with fear of greater market retreat and impressed with rumors that represent a major tool in a chaotic market direction,” the Riyadh-based Bakheet Financial Advisors (BFA) said in their weekly report.
The BFA expected the market to “start stabilizing” this week on condition that measures were taken to restrain speculative stocks in a narrow trading limit.
“Otherwise, the equity market would continue to be vulnerable to additional serious damage due to a speculative grade stock that account for only 2 percent of the market’s capitalization but capture between 40 percent and 60 percent of the trading volume,” the BFA said.
The stock market turnover, however, increased to SR56.90 billion last week compared to SR42.54 billion in the previous week.
The most active by value last week was Saudi Basic Industries Corp. (SABIC) as over SR3.66 billion worth of shares changed hands, followed by Saudi International Petrochemical Co. (Sipchem), which started trading on Tadawul on Saturday, at SR3.30 billion and Al-Rajhi Bank at SR3.16 billion.
SABIC shares gained 1.66 percent in a week to close at SR107, while Al-Rajhi Bank shares declined by 1.84 percent to SR213.
Sipchem shares shocked the market earlier this week by falling below their initial public offering (IPO) price of SR55 on debut. Sipchem shares dropped 17.73 percent at SR45.25 on the first day of trading on Saturday. Its shares later recovered to close Wednesday at SR57.75, up 5 percent over the week.
The top gainer for the week was Tourism Enterprise Co. as its shares jumped 15.87 percent to SR73, while the top loser last week was Al-Baha Investment & Development Co. as its shares plunged 35.94 percent to SR92.25.
Arab stock markets also deepened losses last week for the third week in a row and financial analysts said yesterday the plunge could be explained in terms of psychological factors and falling oil prices.
“I cannot see any justification for this protracted dive in terms of fundamental aspects,” Wajdi Makhamreh, deputy CEO of the Osoul Brokerage Co., told Arab News.
“The plunge at the Saudi market that started three weeks ago could have psychologically affected other bourses in the region,” he said.
The continuing casualties at regional stock exchanges “could find explanation in falling oil prices that indicate a decline in surplus petrodollars which usually represent a moving factor for markets in the region”, he added.
Makhamreh and other portfolio managers expected regional shares to incur fresh losses in the coming few weeks, though markets could witness “short-lived rebounds”.
Jordanian shares also continued to suffer last week mainly due to a liquidity shortage caused by selling of stocks to finance initial public offerings (IPOs).
The all-share price index of the Amman Stock Exchange shed 2.18 percent, closing week at 5,789 points down from 5,918 points last week, according to the ASE weekly report.
Kuwait’s KSE all-share price index declined 1.2 percent, closing week at 10,281 points, down from 10,396 points last week. Kuwaiti analysts voiced caution in remarks published yesterday in local newspapers over a decision by the market’s management to freeze trading in stocks of Al-Khorafi Group for six years after accusing it of violating revelation rules.
They expected Kuwaiti stocks to plummet as of today in the light of news that the market’s watchdog was also considering similar punitive action against 150 firms.
In the United Arab Emirates, the benchmark price of the Dubai stock exchange closed week marginally higher at 379.60 points, compared with last week’s close at 378.65 points.
