JEDDAH, 6 May 2007 -- Malath Cooperative Insurance and Reinsurance Co. shares soared 342.50 percent on debut on the Tadawul yesterday. Following the explosive response of Saudi investors to its initial public offering (IPO), the Riyadh-based Malath, the second of up to 13 insurance firms expected to go public on the Saudi stock market this year, was listed for its first day of trading yesterday. Trading of Malath commenced at 10:15 yesterday morning lasting throughout the regular trading day. The SR10 stock opened at SR46 before leaping to its high of the day at SR56 then dropping to SR42.75 before settling at SR44.25 at the close of trading.

The Tadawul All-Share Index (TASI), however, dropped 205.66 points or 2.73 percent to 7,327.45 points yesterday after rebounding 3.57 percent last week.

Saudi Basic Industries Corp. (SABIC) shares fell 3.23 percent to SR120.

In the banking sector, shares of only SABB and Arab national Bank edged higher yesterday.

Shares of Saudi Telecom Co. (STC) and Etihad Etisalat dropped 4.24 percent and 2.38 percent respectively.

Considered to be one of the largest IPOs among the upcoming insurance company offerings, making its run from Feb. 3-12 of this year, Malath raked in a whopping SR703,649,500 and was oversubscribed nearly five times at 493 percent of its initial offering of 14,244,465 shares or 47.48 percent of its SR300 million capital for public subscription.

Explaining the impact of the new addition of Malath insurance would make to the overall Saudi stock market index, Tawfiq Alwan, financial analyst at BMG Financial Advisors in Jeddah told Arab News, "In terms of the number of shares being traded, the size of the individual company is relatively small therefore unable to make a substantial impact on the total index but I believe that in terms of the amount of companies listing on the Tadawul in the next few months this is what will be a positive factor in adding further depth and giving a positive impact in the psychology of the market itself."

What is the reason behind the sudden interest in the Saudi health insurance market? Many believe it has to do with the value estimated at as much as nearly SR30 billion in the coming decade. The hype is largely thought to be due to the mandatory health insurance policy for expatriates as well as the growing healthcare sector and increase in medical facilities across the country.

"I don't think it's just the fact that the next upcoming IPOs are insurance companies," said Omer Mohammed, a Saudi investor. "I think that with the increased cost of living people are trying to make extra money any way possible and investing in the Saudi stock market is an easy strategy for serving that need of a means of an extra income," he concluded.

Malath is the second company trading in the insurance sector after the National Company for Cooperative Insurance (NCCI). NCCI's shares also rose slightly to SR104 yesterday.

The stock market turnover reached SR11.32 billion yesterday. Over SR1.17 billion worth of Malath shares changed hands yesterday.

Next in line for listing on the TASI is the Mediterranean & Gulf Insurance Company (MedGulf) which is set to make its debut tomorrow. The IPO, following the example of its predecessor, Malath, was oversubscribed four times.

By Khalil Hanware & Sarah Abdullah

© Arab News 2007