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Saudi shares fall to new lows over global economic woes

JEDDAH - Saudi shares tumbled for a third day, sending the stock benchmark Tadawul All Share Index (TASI) to its largest intraday drop since March, amid rising concerns about the global economy after Standard & Poor's cut the US's credit rating for the first time.

TASI slumped 5.46 percent to 6,073.44, the steepest intraday decline since March 1, at the close Saturday. The index has fallen 11 percent from the year-high of 6,786.03 on May 22.

Standard & Poor's downgraded US AAA credit rating for the first time since 1941. S&P lowered the US one level to AA+ while keeping the outlook at "negative".

All 15 TASI industry groups fell with the leading petrochemicals sector down 6.66 percent, energy & utilities 3.08 percent, banks 4.74 percent, retail 4.72 percent, telecoms 4.98 percent, media & publishing 2.60 percent, insurance 8.41 percent, agricultural & food 4.60, real estate 4.62, building & construction 6.48 percent, industrial investment 5.09 percent and cement 0.61 percent.

Leading banking shares dropped by 4.7 percent while shares of the petrochemical sector shed 6.7 percent. Construction shares were also 6.4 percent lower.

SABIC slumped 3.4 percent to SR100.25, the sharpest intraday decline since June 4. Al Rajhi declined 2.8 percent to SR70, the lowest intraday level since March 6. National Industrialization Co. ( NIC ), also known as Tasnee , dropped 6.8 percent, the sharpest decline since April 4, to SR39.50.

Al-Rajhi bank was down 5.2 percent in afternoon trading, while SAMBA bank dropped 6.98 percent. Petrochemicals giant SABIC saw its shares drop 5.54 percent.

In the telecommunications sector, STC shares dropped 2.56 percent, while Zain KSA plummeted 6.15 percent. Etihad Etisalat also fell 5.9 percent.

"Saudi shares have reacted to two events: sharp drops Thursday in markets, especially oil, and the S&P cut of the US rating," economist Mohammed Al-Omran told Al-Arabiya news channel.

He noted that the Saudi market was the first to react globally to the late Friday S&P statement on the US economy, with the start of the trading week in Saudi Arabia, while all other markets remained shut for the weekend.

"The Saudi economy relies on exports, mainly petrochemicals, so it is normal that it would be strongly affected," he added.

"The S&P rating and (debt) problems in Europe... have scared investors," said financial analyst Abdulwahab Abu Dahesh, pointing out, however, that the "down trend had started a while ago." Further drops in the Saudi market are expected, depending on the (movement of) international markets, he added.

"The combination of the global equity and commodities meltdown during the Saudi weekend and to a lesser extent the expected downgrade by S&P is having an impact on all sectors of the market," said Fuad Aghabi, a director at Ajeej Capital, in Riyadh.

"At this point, the impact of the ratings downgrade is not evident," said Bukhtiar. "Regional markets will take their cue from global markets Monday when they open."

© The Saudi Gazette 2011