Tadawul falls 3.4%; Saudi petrochemical stocks hit by oil price disapp

29/09/2016 05:10 AST

Saudi Arabia’s stock market fell sharply for a second straight day on Wednesday, leading the entire region down, in response to weak oil prices and government austerity measures. The Saudi equities index, which had retreated 3.8 percent on Tuesday, sank a further 3.4 percent to 5,534 points, its lowest finish since Jan. 21. It has tumbled 19.5 percent from a peak in April.

Trading volume climbed to a two-month high as the index fell below technical support on the February low of 5,551 points, though it closed off its intra-day low. It has stronger support at the January low of 5,349 points.

Brent oil futures had fallen about 3 percent to around $46 a barrel on Tuesday after Iran rejected an offer from Saudi Arabia to limit its oil output in exchange for Riyadh cutting supply.

This hit petrochemical stocks, with Saudi Basic Industries sliding 4.0 percent on Wednesday. PetroRabigh outperformed the sector, dropping only 2.1 percent, after saying it would proceed eventually with a rights issue that has been delayed since 2015.

The Saudi insurance sector also suffered after the government said this week that it would reduce bonuses and perks for public sector workers; insurance stocks are favored by local retail investors, who will have less disposable income because of the austerity drive.

“In Saudi Arabia it is very common to see an average public sector employee trading in the stock market, because someone from his family once made a fat profit — but those days are long gone now. They simply won’t have the financial flexibility with these austerity moves,” said a Jeddah-based broker.

Among other stocks directly exposed to consumer sentiment, travel agent Al Tayyar plunged 8.2 percent.

Some telecommunications firms and utilities, seen as defensive shares, performed relatively well and Zain Saudi was one of only four rising stocks, gaining 3.1 percent.

Elsewhere in the Gulf, Dubai’s index fell 0.4 percent in thin trade as Emaar Properties lost 1.0 percent. Abu Dhabi dropped 0.5 percent with another real estate firm, Aldar Properties, falling 1.5 percent.

Qatar edged down only 0.1 percent, supported by a 1.2 percent gain by Industries Qatar. In Egypt, the index dropped 0.5 percent in a broad-based decline. But textile producer Kabo jumped 10 percent in its highest trading volume since January after posting a 14 percent rise in net profit for the year to June 30.

Arab News