JEDDAH, 1 March 2007 — Share prices plunged across most of the world’s stock markets yesterday on signs of economic slowdown in the United States and an end to a speculative bubble in China, analysts said.
Dr. Mohamed Ramady, visiting associate professor at King Fahd University of Petroleum and Minerals, told Arab News there were many factors involved in the worldwide stock market falls.
“Firstly, most analysts agree that the falls, triggered by a correction in the Chinese stock market, should be seen just as that — a correction — as all the indications are that the Chinese economy is fundamentally strong and still on target for a growth rate of just under 10 percent. Basically, many markets had overheated and climbed beyond current company earning ratios and prospects, and this, coupled with a fear that interest rates in general around the world are beginning to rise, has caused some opportunistic stock selling.”
According to Ramady, the main concern is of a faltering of the US economy and a ripple effect on China and other major US trading partners, “but I believe the falls in Asia will be short-lived, as the economies there are now more diversified, better managed and structurally stronger than during previous Asian monetary or stock market crises.”
The Saudi bourse also followed global stock markets yesterday. The Tadawul All-Share Index (TASI) closed down for the third straight day at 8,176.37 points. The index was down 137.45 points or 1.65 percent. But TASI is still 3.06 percent or 243.08 points higher than the year’s start.
Out of 86 companies traded, only 19 were in the positive territory while shares of 65 companies declined. Only the Cement index was higher while all other indices fell. In the banking sector, Samba Financial Group’s shares rose 2.70 percent to SR152 and Arab National Bank’s shares stayed unchanged at SR108, while all other banks were in the red yesterday.
Shares of the bellwether Saudi Basic Industries Corp. (SABIC) dropped 2.33 percent to SR115.25.
In the telecom sector, shares of Saudi Telecom Co. (STC) fell 2.34 percent to SR73 and Etihad Etisalat by 3.08 percent to SR55 yesterday. Over SR14.47 billion worth of shares changed hands.
Yesterday, European stocks dropped, but by midday the losses were less sharp than those seen one day earlier. In afternoon deals, London’s FTSE 100 index of leading shares dropped 0.97 percent to 6,225.10 points, while the CAC 40 was showing a fall of 0.93 percent to 5,536.56 points.
Frankfurt’s DAX 30 index slid also 0.93 percent to 6,756.53 points.
Earlier yesterday, the London and Paris markets had seen their 2007 gains wiped out. “What we are seeing is the echo of the fall in the Chinese market (on Tuesday) and more importantly the fall that we saw in the US equity market overnight,” said Glenn Maguire, chief economist for Asia at Societe Generale.
While Chinese shares rebounded, stocks continued to fall heavily in Tokyo, Sydney, Hong Kong and Mumbai.
In Mumbai, share prices tumbled more than four percent as investors gave a thumbs down to the new federal budget that raised spending on education and health. The 30-share Sensex index plunged 540.74 points or 4.01 percent in choppy trade to 12,938.09. Traders were meanwhile nervously awaiting the reopening of Wall Street, which saw declines of more than 3.0 percent on Tuesday.
— With input from agencies
