Saudi Arabian stocks tumbled on Saturday, tracking a drop on world markets, as investors worried that an oil price fall and possible global recession would hit growth of companies in the world’s top oil exporter.
The benchmark of the largest Arab bourse closed 8.7 percent lower at 5,634.68 points, a day after bourses around the world plummeted as investors, fearing a long and deep worldwide recession, dumped risky assets.
“The Saudi market is positively correlated with the global markets, especially the big ones,” said John Sfakianakis, chief economist at SABB bank, HSBC’s Saudi affiliate.
“As we’ve seen these markets tumble, the Saudi market has tumbled by a higher degree. There is negative sentiment.”
Saudi investors were also reacting to the near $4 drop in oil prices on Friday that happened despite an agreement by producer group OPEC to cut crude output by 1.5 million barrels a day (bpd), analysts said.
Crude prices have dropped by more than half since hitting record levels above $147 a barrel in July.
“The OPEC cut did not have any positive affect on oil prices and everybody is so depressed,” said Abdullah Al-Rashoud, chief executive at Riyadh-based KSB Capital Group.
“There is a lot of feeling that there is no hope – that the global economy is going into recession,” Al-Rashoud said.
Six other stock markets in the world’s biggest oil-exporting region are closed on Saturdays.
In Saudi Arabia, petrochemical and banking stocks led the selloff, with Saudi Basic Industries Corp. (SABIC) – the largest stock – shedding 9.79 percent to 73.8 riyals ($19.68).
SABIC’s fair value could be downgraded to about 60 riyals if global petrochemical prices fall on a slowdown in demand for chemicals, Al-Rashoud said. SABIC reported its first decline in quarterly profit in more than two years in the third quarter on a slowdown in sales growth.
Banks in the Gulf region were also likely to witness profit declines related to the global credit crisis, which has raised the cost and reduced the availability of funding, analysts added.
Al-Rajhi Bank, Saudi Arabia’s biggest bank by market value, tumbled 9.76 percent and Riyad Bank lost 10 percent.
Dar Al-Arkan Real Estate Development Co. closed 9.96 percent lower after the kingdom’s largest developer by market value posted a third-quarter profit rise of 720 million riyals, up 4.3 percent from the year-earlier period.
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