05/11/2014 00:31 AST
Shares in Saudi Arabian telecommunications firm Mobily plunged their 10% daily limit yesterday after the firm restated 18 months of earnings and posted a shock profit drop, undermining the entire stock market.
Mobily, the country’s second biggest telecommunications operator, tumbled to a 21-month closing low of 72riyals at the opening and remained at that level for the rest of the day.
At the close, about 310,000 of Mobily’s shares had traded while sell orders of about 27.6mn shares were unfulfilled, indicating the stock could decline further today.
“It’s total frustration in such a large and professional company as Mobily,” said Mohammad Omran, a member of the Saudi Economic Association, a think tank at Riyadh’s King Saud University. “We believe the stock will continue to fall until it reaches around 60 riyals.”
Omran said such a valuation would be fair after Mobily on Monday cut its profits for 2013 and the first half of 2014 by a combined 1.43bn riyals ($381.2mn), citing accounting errors. The firm also revealed a 71% drop in third-quarter profit.
The Capital Market Authority subsequently announced it had launched an investigation into Mobily, 28% owned by the UAE’s Etisalat, to determine whether it had violated bourse rules - just a few months before the stock market is due to open up to direct foreign ownership.
“It’s positive this came out now - Saudi still maintains a very good reporting system and accounting standards, and I don’t think one company can spoil the whole market,” said Omran.
But the whole Saudi market slid, with the main share index falling 3.5% to a two-week low, as the Mobily debacle raised concern among some investors about the possibility of the regulator cracking down on other companies’ earnings statements before the market opens to foreigners.
In addition to Mobily, the price of Brent crude oil fell to a more than four-year low near $82 a barrel yesterday after Saudi Arabia cut sales prices to the US.
Shares in Saudi basic Industries Corp, the Gulf’s largest listed company and one of the world’s top petrochemicals producers, dropped 5.5%.
Most other Gulf markets were flat or suffered minor declines, but telecommunications firms fared poorly across the region.
Shares in Zain, Kuwait’s biggest telecommunications firm by subscribers, dropped 1.6% after it posted a 13% fall in third-quarter profit to 46mn dinars ($158mn); analysts had on average forecast 60.1mn dinars. It cited foreign exchange losses and Iraq’s civil war disrupting operations in the country.
But Egypt’s benchmark index climbed 1.0% to a four-week closing high of 9,531 points. It is up 12% from October 19’s three-month low.
“A base was formed at 8,500 points, with the market supported by foreign institutions which have been net buyers for the past week,” said Mohamed Radwan, director of international sales at Pharos Securities in Cairo. “The market has confused a lot of people and whether it continues towards the year-high (of 9,811 points) or has another drop is yet to be determined.”
Orascom Telecom Media and Technology was the among the main supports, climbing 2.4% and accounting for nearly half of all shares traded. Its shares are up 18% since billionaire chairman Naguib Sawiris became chief executive on October 23.
Bahrain’s bourse was closed for a national holiday.
Elsewhere in the Gulf, Kuwait’s index fell 0.4% to 7,293 points, while Oman’s measure dropped 0.4% to 7,006 points.
Reuters
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