• Home
• News Article

Newly Split Agro Shares Have Slow Start, Tadawul Slips by 3.16% in Morning Session

Beirut (APD) - In its first session after new measures came into effect, the Saudi Stock Market (Tadawul) on Saturday could not maintain the strong momentum that allowed it to achieve a 14.1% increase over the past three days of trading.

After two days of closure, the morning session led the Tadawul All Share Index (TASI) to decline by 3.16% to close at 16,520.65 and contradicted highly optimistic Saudis who had predicted an immediate upward trend for Tadawul after stocks in three sectors were split five-to-one and the Capital Market Authority (CMA) increased the ceiling for daily share price fluctuations to 10%.

Agriculture, insurance and services were the first sectors to implement the share split on Thursday, as Tadawul remained closed for this reason. The three sectors combined make up only 5.83% of the total Saudi market capitalization, according to a recent report by Kuwait-based financial firm, Kuwait and Middle East Financial Investment Company.

The splitting of shares had a visible impact on the smallest of the three sectors, insurance, whose seven listed companies in mid March accounted for a mere 0.3% in Tadawul market cap. The insurance sector index increase of 7.15% on Saturday morning brought it back up to levels last achieved in early February, before Saudi bourse entered a correction phase.

The services and agriculture sector indices ended the morning session with declines of 1.79% and 1.11%, respectively. However, they performed better than the banking, power and industrial sectors whose indices retracted by between 3.69% and 4.14% for the session.

The increase in fluctuation rate from 5% to 10% led to increased selling of the shares in large companies while benefiting companies like Yansab and Jarir Marketing which saw their shares hit the ceiling, trading up by 10% and 9.93%, respectively.

More surprisingly, the stock prices of four major Saudi agricultural companies, which underwent a stock split, were affected rather negatively and went down by between 9.5% and 9.98%. These companies were Al Baha for Development and Investment Company, Bisha Agricultural Development Company, Saudi Fisheries Company, and National Agricultural Development Company.

"What happened today is normal, since we do not expect people to jump in and directly invest in the companies which performed a stock split even though the par value of the share price is lower thus attracting small investors," the finance manager of one of the Saudi agricultural companies told APD on Saturday on condition of anonymity.

Other large agricultural companies refused to comment entirely.

Referring to the hoped-for infusion of fresh money into the market from resident expatriates, the manager opined that foreign investors would not be fully integrated in the Saudi market until all four stages of the stock split are completed. He added that local banks had set inconsistent entry requirements for foreign residents as some banks asked for a minimum deposit of SR 50,000 for opening an account while others demanded SR 100,000.

The Saudi stock market's heavy hitters in terms of companies and sectors, namely banking and petrochemicals, will undergo the stock split in the coming weeks. [TS]

By Nadim Issa, APD Staff Writer in Beirut

© APD (Arab Press Digest) 2006