Saudi stocks plummet as oil drops below $50

STOCKS PLUMMET: Saudi's benchmark closed down more than nine percent. (Getty Images)

The Saudi bourse's all-share index closed 9.2 percent lower on Saturday with blue chips leading near across-the-board declines.

The index shed 448.87 points to end at 4,431.57 points its lowest level since early 2004. Of the 125 listed firms, only two ended higher.

The Arab world's largest bourse is showing its first reaction to the fall of New York oil prices below $50 per barrel on Thursday for the first time since May 2005. The bourse was closed on Thursday and Friday.

"It's a sellers' market with low demand... The $50 mark is a crucial psychological benchmark for the market," said John Sfakianakis, chief economist at SABB bank, HSBC's Saudi subsidiary.

Many analysts fear that oil-based economies like that of Saudi Arabia will not be able to maintain macroeconomic balance and keep up the same public spending spree of the past five years if oil prices fall below the $50-a-barrel level.

The global crisis is not helping allay these fears.

"The negativity of global equities especially in the US is reflected on the local market, particularly for the petrochemical and banking sectors," Sfakianakis added.

The malaise felt by the world's largest bank Citigroup extended to both Kingdom Holding, whose stock ended at a life-low of 4.2 riyals, down 9.7 percent from Wednesday's close, and to Samba Financial Group which fell 9.65 percent.

Kingdom Holding groups investments by Saudi billionaire Prince Alwaleed bin Talal and these include a significant stake in Citigroup and a five percent stake in Samba.

On Thursday, Prince Alwaleed said he began increasing Kingdom Holding's stake in Citigroup to five  percent from less than four percent. The bank's largest individual investor called Citigroup's shares "dramatically undervalued".

Citigroup is in talks with the US government as its plummeting share price raises doubts about its ability to survive, a person familiar with the matter said. (Reuters)

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