x Abu Dhabi, UAEThursday 18 January 2018

Tadawul falls 8.7% on global troubles

Saudi Arabian stocks fall sharply, tracking a slump in world markets, as investors fear possible global recession.

DUBAI // Saudi Arabian stocks fell sharply today, tracking a slump in world markets, as investors worried an oil price plunge and possible global recession would hit the growth of firms in the world's top oil exporter. The benchmark of the largest Arab bourse closed 8.7 per cent lower at 5,624 points, a day after markets around the world plummeted as investors, fearing a long and deep worldwide recession, dumped risky assets.

The index has fallen more than 44 per cent so far this year and is the worst performing measure in the Gulf region, after Dubai. "The Saudi market is positively correlated with the global markets, especially the big ones," said John Sfakianakis, the chief economist at SABB bank, HSBC's Saudi affiliate. "As we've seen these markets tumble, the Saudi market has tumbled by a higher degree. There is negative sentiment."

Saudi investors were also reacting to the near US$4 (Dh14.70) drop in oil prices on Friday despite an agreement by Opec to cut crude output by 1.5 million barrels a day, analysts said. Crude prices have dropped by more than half since hitting record levels above $147 a barrel in July. "The Opec cut did not have any positive affect on oil prices, and everybody is so depressed," said Abdullah al Rashoud, the chief executive at Riyadh-based KSB Capital Group. "There is a lot of feeling that there is no hope - that the global economy is going into recession."

Six other Gulf stock markets were closed today. In Saudi Arabia, petrochemical and banking stocks led the sell-off, with Saudi Basic Industries Corp (Sabic), the largest stock, shedding 9.79 per cent to 73.8 Saudi riyals (Dh72.32). Sabic reported its first decline in quarterly profit in more than two years in the third quarter. Banks in the Gulf region were also likely to witness profit declines related to the global credit crisis, analysts added.

Dar al Arkan Real Estate Development closed 9.96 per cent lower after the kingdom's largest developer posted a third-quarter profit rise of 720 million riyals, up 4.3 per cent from the same period a year earlier. Al Rajhi Bank, Saudi Arabia's biggest bank by market value, tumbled 9.76 per cent and Riyad Bank lost 10 per cent. Saudi Arabia has cut the amount of money that commercial banks have to keep with its central bank to 10 per cent from 13 per cent, effective from last month, the central bank said in a statement on its website today. The Saudi Arabian Monetary Agency informed banks of the decision on Oct 12. * Reuters