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Sat 23 Jan 2010 07:58 PM

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Saudi shares slip to six week low after US Pres proposal

US led proposal to limit trading activities of financial instiutions sees global shares tumble.

Saudi Arabian shares tumbled the most in more than six weeks, led by Saudi Basic Industries Corp and Samba Financial Group, as President Barack Obama’s plan to rein in banks sent shares tumbling across the globe.

Saudi Basic Industries Corp, the world’s largest petrochemical maker known as SABIC, declined the most in almost a month, while Samba, the kingdom’s second biggest bank, fell the most since October. The Tadawul All Share Index slipped 1.4 percent to 6,295.92, the biggest decline since Dec 9.

The decline is due to “the effect of the global markets,” Raj Sinha, head of equity research at HSBC Saudi Arabia, said in an email.

He added: “Earnings season was fine, but there wasn’t a case of overall positive or overall negative, so global markets are a key driver today.”

Obama called this week for limiting the size and trading activities of financial institutions as a way to reduce risk taking and prevent another financial crisis.

The proposals, to be added to an overhaul of regulations being considered by the US Congress, would prohibit banks from running proprietary trading operations solely for their own profit and sponsoring hedge funds and private equity funds.

Saudi Arabian bank earnings suffered last year amid weaker economic growth and as lenders set aside money to cover bad debts. The country’s economy, the Arab world’s biggest, is expected to have grown 0.15 percent in 2009 versus 4.5 percent in the previous year, the Finance Ministry said Dec 21.

Crude fell for a third day, closing yesterday at $74.54 a barrel. Saudi Arabia is the world’s biggest oil exporter.

Sabic lost 1.1 percent to $23.71, its biggest one day drop since Dec 28. Samba dropped 3.1 percent, its biggest decline since Oct 27, to $14.6.

The lender said Jan 10 fourth quarter profit rose 1.1 percent to $223.13 million from the year earlier period.

Saudi Arabia’s index is the only Arab Gulf index tracked by Bloomberg that trades on Saturday.

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