Bloomberg News

Saudi Shares Reach Four-Month Low on Below-Estimate U.S. Growth

July 30, 2011

July 30 (Bloomberg) -- Saudi Arabian shares dropped to the lowest level since March after U.S. economic growth missed economists’ forecasts and Moody’s Investors Service said it may cut Spain’s credit rating.

Saudi Basic Industries Corp., the world’s biggest petrochemicals maker, reached its lowest price in almost five weeks. Etihad Etisalat Co. and Al Rajhi Bank, the kingdom’s largest publicly traded lender by market value, declined.

The 147-company Tadawul All Share Index slid 1.4 percent to 6,355.72, the lowest level since March 22, at the 3:30 p.m. close in Riyadh. All 15 industry groups dropped.

“The market is reacting to bad international news, including below-expectation U.S. economic growth and the debt re-rating of some European countries,” said Akef Al Tanbouz, head of asset management at The Investor Securities Co. in Riyadh. “The U.S. debt issue has not yet been resolved.”

Gross domestic product in the U.S. rose at a 1.3 percent annual rate in the second quarter, Commerce Department figures showed yesterday. That was less than the 1.8 percent median forecast of economists surveyed by Bloomberg News.

U.S. lawmakers failed to agree on raising the federal government’s debt ceiling before the Aug. 2 deadline. The Republican-controlled House passed Speaker John Boehner’s plan to cut spending and raise the debt limit. Within hours, the Senate rejected it as Democrats pressed for passage of their own alternative.

“With the U.S. debt ceiling issue still unresolved, this has put pressure on the Saudi market as traders de-risk awaiting resolution in lieu with global equities retreat over the Saudi weekend,” said Fuad Aghabi, a director at Ajeej Capital, in Riyadh.

Crude Declines

Oil capped its first weekly drop since June yesterday. Crude for September delivery retreated 1.8 percent to $95.70 a barrel on the New York Mercantile Exchange, the lowest settlement since July 11. Prices tumbled 4.2 percent this week. Saudi Arabia holds 20 percent of the world’s proven oil reserves.

Sabic slumped 1.9 percent to 102.25 riyals, the lowest price since June 27. Al Rajhi declined 0.7 percent to 72 riyals, the lowest level since June 25. Etihad Etisalat, the phone operator known as Mobily, dropped 0.9 percent to 53 riyals.

Saudi Arabia’s stock exchange is the only Gulf Arab bourse open on Saturdays.

--Editors: Dan Weeks, Anne Pollak.

To contact the reporter on this story: Mourad Haroutunian in Riyadh at mharoutunian@bloomberg.net

To contact the editor responsible for this story: Shaji Mathew at shajimathew@bloomberg.net


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