Saudi stocks slide 4%, falls the most globally on austerity steps

28/09/2016 04:52 AST

Investors fled Saudi’s Tadawul stock exchange yesterday following an announcement that the government would implement additional austerity measures, a move expected to hurt consumer demand.

Saudi Arabian stocks tumbled 3.79 per cent, the most in the world. The Tadawul all share index fell as much as 3.99 per cent before closing lower at 5,730.69. “Investors are cautious after the austerity measures that the government undertook to reduce deficit. This is what causing the selling panic,” Tariq Qaqish, head of asset management at Al Mal Capital told Gulf News over phone.

Saudi Arabia on Monday said it will be cancelling allowances and bonus payments for government employees for the year, and also cut ministers’ salaries by 20 per cent The additional austerity measures are the latest spending cuts brought on by falling oil prices. Oil, from which the government derives yje majority of its revenues, has tumbled more than 50 per cent from a high of over $100 per barrel in 2014.

Broad-based selling

Selling was broad-based and all of the 169 stocks closed in the negative. The energy and utilities index closed more than 5.85 per cent lower, while the banking index closed 3.04 per cent lower. The petrochemical Industries closed more than 4 per cent weaker. Alinma Bank, which was the most active stock in terms of number of shares, closed more than 4.49 per cent lower at 11.90 Saudi Riyals. Dar Alarkan Real Estate Development Co. closed 7.87 per cent lower at 4.80 Saudi Riyals.

“It’s a matter of sentiment, and retail investors are scared, but from institutional point of view, I don’t see that. The steps taken would have a positive impact over a longer term, but retail investors don’t see that,” Qaqish said.

“Markets would recover on Wednesday as we see value in Saudi stocks. This is a short-term panic, and investors would go back and see value in these stocks over the coming sessions,” Qaqish added. The index has shed more than 17 per cent since the start of the year.

Back home in the UAE markets, the Dubai Financial Market General Index closed 0.76 per cent lower at 3,466.56, while the Abu Dhabi Securities Exchange General Index closed 0.46 per cent lower at 4,471.68.

Gulfnews