Broad sell-off sees main Saudi index sinking by 5%, its biggest daily drop in three months
Saudi Arabia's stock market tumbled in a broad sell-off on Wednesday as investors grew concerned about upcoming first-quarter earnings announcements, stretched valuations and the escalation of military conflict in neighbouring Yemen.
The main Saudi index sank 5.0 percent, its biggest daily drop in three months, with most stocks deeply in the red.
The benchmark had vastly outperformed other Gulf markets and was up 12 percent year-to-date as of Tuesday's close. Most other markets in the region are sitting on year-to-date losses.
"We have been talking about expensive valuations for the last couple of weeks," said Abdullah Alawi, assistant general manager and head of research at Aljazira Capital. "But the drop was faster than expected."
Expectations for first-quarter earnings were another negative factor for some stocks, although Alawi said they had mostly been priced in already.
Broker and fund manager Osool and Bakheet Investment Co (OBIC) has published its forecasts for a number of companies, predicting sharp declines for the petrochemicals sector and minor decreases for some banks.
Advanced Petrochemical Co, whose net profit OBIC expects to plunge 87 percent, tumbled 7.8 percent on Wednesday. National Commercial Bank, the kingdom's biggest lender, fell 5.1 percent after OBIC forecast its quarterly profit would slip 1.5 percent.
Instability in Yemen also hurt market sentiment. Saudi Arabia is moving heavy military equipment including artillery to areas near its border with Yemen, U.S. officials said on Tuesday, indicating a risk that Riyadh might be drawn into the conflict.
The Arab League's deputy secretary general said on Wednesday that the regional body would discuss a proposal by Yemen's foreign minister, who called on Arab states to intervene militarily to halt the Houthi Shi'ite militia's advance.