Saudi suffers biggest 1-day fall in 7 weeks

21/04/2009 00:00 AST

Slumping banking and petrochemical stocks dragged the Saudi index to its biggest one-day fall in seven weeks, while Dubai rose after the emirates ruler said the worst of the financial crisis was over.

The comments from Sheikh Mohammed bin Rashid al-Maktoum, who is also the UAEs prime minister and vice-president, helped boost local sentiment as the Dubai benchmark advanced for a fourth straight session, but doubts over economic fundamentals remain, analysts said.

The other Gulf Arab markets all rose, but the sudden Saudi downturn bodes ill for stocks on Monday, with most of Saudis losses inflicted after the other regional bourses had closed.

"The markets have been so bullish, but sentiment has been driving them, rather than fundamentals," said Sanyalaksna Manibhandu, Emaar Saudi Financial Services head of research.

"Saudi has been leading Gulf markets and so the others should expect profit-taking tomorrow. This will be good for the medium-term uptrend because it will allow new investors to come in at lower levels."

Saudi Basic Industries fell almost 9 percent as all sectors retreated, with losers outnumbering gainers by more than 10 to one.

The sudden reversal in fortunes - the Saudi benchmark increased by 31 percent in the six weeks to Sunday - underlined the fragile confidence of investors who are still apprehensive from a savage decline in equities over the past 12 months.

"I expect the markets to consolidate and lock in some profits over the coming days ahead of first quarter earnings releases," said Matthew Wakeman, EFG-Hermes managing director for cash and equity-linked trading.

"Stock specific stories will still draw investors, but the broad market rally may lose some momentum as we look for earnings to justify current levels."

The Dubai index soared to its highest close since Jan. 12, with property-related stocks the biggest gainers as Sheikh Mohammeds comments boosted sentiment.

"The worst is over and is behind this," Sheikh Mohammed said in remarks on his new website while answering questions from journalists. "Since the breakout of the crisis, no bank or government company declared bankruptcy and none of the sectors of the economy broke.

"We are carrying out plans and work programmes that benefit from the lessons of the crisis and guarantee recovery from its negative impact."

Reuters