Saudi bourse falls sharply

STOCKS FALL: Saudi's main index closed down sharply on Saturday. (Getty Images)

Saudi Arabia's stock market index fell sharply paced by Saudi Basic Industries Corp. (SABIC) which plunged after oil prices hit their lowest level since February, 2004 despite OPEC's biggest ever production cut.

The index closes 4.05 percent lower at 4,705 points.

Oil prices dip below $34 a barrel in New York on Friday, their lowest level in more than four years after OPEC announces it will cut 2.2 million barrels per day from January.

"The sharp drop in oil price had an impact on investor sentiment and the weird thing is that we have not seen such swift reaction in the past when oil prices were rising to break one record after the other," said Abdulhamid al-Amri, a member of the semi-official think tank the Saudi Economic Association.

"The market reacts more to negative news than to positive development because of the predominance of retail investors who tend to react emotionally and in a every exaggerated fashion."

The surge in oil prices over the past five years should enable Saudi Arabia to weather the impact of lower oil prices.

"The state's accumulated assets are large enough to absorb three years of budget deficits even if oil prices fall to $15 a barrel and with a daily production of 7.5 million barrels," Amri said.

Shares in Saudi Arabian Mining Co., also known as Maaden, closed 4.61 percent lower after British firm Rio Tinto dropped a plan to take a 49 percent equity stake in an aluminium joint venture that was projected to cost $10 billion because of the global crisis.

Saudi Telecom was down 2.64 percent.

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