Saudi shares slump on recession fears

LOSSES EXTENDED: Saudi main index has fallen more than 5 percent in trading. (Getty Images)

Saudi shares extended losses on Saturday as investors began to discount the potential effects of a looming global economic recession on listed firms, mainly blue chips.

"The market is under pressure with 2009 promising to be a year of recession... Investors are trying to figure out how this will impact the stocks and they see that prices today are too high if we were to project lower earnings in 2009," said Abdulhamid Al-Amri, a member of semi-official think-tank Saudi Economic Association.

"This crisis will have an impact on the oil price. It will pressure the margins of petrochemical companies and also affect planned projects."

Saudi Basic Industries Corp. (SABIC), the world's largest petrochemical firm by market value, shed 8.8 percent, its affiliate Saudi Fertilisers Co. closed almost limit down at 9.91 percent and Samba Financial Group was down nearly 4 percent.

The all-share index shed 5.78 percent to 5,732.03 points.

EFG-Hermes rates Samba's shares 'neutral' for the short-term and 'accumulate' for the long-term, according to a research note received on Saturday.

It expects Samba's investment losses to further widen in the fourth quarter "as equity values globally have declined considerably since Sept. 30, 2008."

"Based on information available as of Dec. 31, 2007, Samba has one of the highest exposures among Saudi banks to equities and mutual funds," EFG-Hermes said.

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