Stock News: Saudi Index Tumbles 5%, Dubai Drops 4.7%
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Stock News: Saudi Index Tumbles 5%, Dubai Drops 4.7%

Stock News: Saudi Index Tumbles 5%, Dubai Drops 4.7%

The Saudi index sank to 9,407 points, its lowest level since mid-April.

Gulf Business

Saudi Arabia’s main stock index plunged five per cent on Thursday amid panic selling by retail investors, dragging down other stock markets in the Gulf.

The Saudi index sank to 9,407 points, its lowest level since mid-April. In response, Dubai’s index tumbled 4.7 per cent and Qatar lost 2.3 per cent.

The Saudi market has now erased all of the 14 per cent gains which it posted after authorities announced in late July that they would open the market to direct foreign investment early next year.

Traders said the slide of global equity markets had undermined confidence in Saudi Arabia, while the drop of oil prices to their lowest level since 2010 was also negative for the world’s biggest oil exporting country.

Economists do not expect cheap oil to be a disaster for the Saudi economy; its state budget breaks even at an oil price of around $90, but it has huge fiscal reserves that will allow the government to keep spending even if oil stays low for a long period.

However, petrochemical companies’ shares are correlated with the oil price, and they are heavily weighted in the market. Shares in Saudi Basic Industries, one of the world’s biggest petrochemical producers, were down 4.9 per cent.

Also, a $6 billion initial public offer of shares by state-owned National Commercial Bank, Saudi Arabia’s largest lender, is due to begin next week.

The offer is expected to attract strong demand, which means it will temporarily suck liquidity out of the rest of the stock market as investors sell stocks to raise money for subscriptions.


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