JEDDAH: The Saudi stock market rebounded yesterday in reaction to a decision on Sunday by the Saudi Arabian Monetary Agency (SAMA) to cut the repo rate by one percentage point to three percent and to reduce mandatory reserves that banks must hold from 10 percent to seven percent. The market fell 13 percent in the first two days of the week.
The Tadawul All-Share Index (TASI) gained 6.21 percent or 264.67 points to close at 4,529.19. The index is still down 58.97 percent so far this year.
Out of 125 stocks traded, only three companies — Ash-Sharqiyah Development Co., Tawuniya and Arab Shield Cooperative Insurance Co. — were in the red as all other firms were in the black. Over SR7.04 billion worth of shares changed hands yesterday.
The TASI was solidly spurred by the leading banking and petrochemicals sectors, which rose 7.07 percent and 7.55 percent, respectively.
Commenting on SAMA’s decision, John Sfakianakis, chief economist at SABB (The Saudi British Bank), said “The SAMA moves are ultimately geared to boosting growth as inflation is less of a systemic worry going forward. Private credit growth needs to be sustainable in an environment where regional and international credit flows are restrictive. The cost of private sector borrowing has been rising since the beginning of the past summer. By reducing the reserve requirement an additional 1.9 percent of GDP was added as potential credit that can be deployed by banks. The repo cut is intended to further push interest rates down. We have to see to what degree these measures will be adequate to address the above systemic challenges.”
Many blue chips on the market made strong gains. Market leader SABIC (Saudi Basic Industries Corp.) rose 8.34 percent to SR46.60, Al-Rajhi Bank, the largest lender, increased 9.83 percent to SR52.50 while Saudi Telecom Co. (STC) added 7.87 percent to SR45.20.
The Capital Market Authority (CMA), the stock market regulator, yesterday authorized Talal Abo Ghazalah Financial Consulting Company and Rawasi Financial Solutions to conduct arranging and advising in the securities business.
The CMA also amended the license of Osool Capital Company yesterday to include dealing as principle, agent, managing and custody in the securities business.
Saudi Cable Co. (SCC) shares surged 2.15 percent to SR23.65 yesterday after the announcement by Waheeb A. Linjawi, group president & managing director, that the company has received a purchase order for high voltage cables worth SR34 million from a neighboring Arab country this month.
The picture was totally different in other stock markets in the Gulf yesterday.
Dubai index lost 5.33 percent to 1,814 points, its lowest close since November 2004 while Abu Dhabi index lost 3.44 percent. The Kuwait Stock Exchange dropped 1.9 percent to 8,644.10 points and the Doha Securities Market retreated 1.3 percent to 5,504.53 points.
