Bloomberg News

Saudi Stocks Fall Most in Two Weeks on Global Recovery Concern

August 20, 2011

Aug. 20 (Bloomberg) -- Saudi Arabian shares fell the most in two weeks after reports signaled the global economic recovery is faltering, damping investors’ appetite for riskier assets and as oil declined.

Saudi Basic Industries Corp., or Sabic, the world’s biggest petrochemicals maker, and Al Rajhi Bank, the kingdom’s largest publicly traded lender, sank more than 2 percent. The 147- company Tadawul All Share Index lost 2.6 percent, the sharpest decline since Aug. 6, to 5,931.29, at the 3:30 p.m. close in Riyadh, extending this month’s slump to 7.2 percent. All 15 industry groups retreated.

The Standard & Poor’s 500 Index of U.S. stocks tumbled 5.9 percent and the Stoxx Europe 600 Index lost 6.3 percent over the previous two days, the Saudi weekend. Reports showed jobless claims rose in the world’s largest economy and Philadelphia-area manufacturing shrank by the most since 2009, while investors speculated that European banks lack sufficient capital.

“The market is reacting to negative signals coming from international markets as well as the weak economic performance in Europe and the U.S.,” said Akef Al Tanbouz, head of asset management at The Investor Securities in Riyadh.

Morgan Stanley cut its forecasts last week for global growth this year, saying the U.S. and Europe are “dangerously close to recession.” JPMorgan Chase & Co. lowered estimates for the U.S., saying it may expand less than previously projected in the next two quarters as consumer sentiment drops and the housing market fails to gain momentum. Citigroup Inc. also cut its projection for the U.S.

Sabic, Al Rajhi

Oil prices fell 3.7 percent last week in New York, capping an 18 percent slump since July 22, the biggest four-week decline since October 2008. Saudi Arabia holds 20 percent of the world’s proven oil reserves.

Sabic retreated 3.6 percent to 93 riyals, its lowest price since March 5. National Industrialization Co., the petrochemical company known as Tasnee, plunged 6 percent to 35.9 riyals. Al Rajhi declined 2.9 percent to 68 riyals.

“Basically the market is reacting to the plunge in global equities and commodities,” said Fuad Aghabi, a director at Ajeej Capital in Riyadh. “Confidence levels are lower because of the ongoing global volatilities on fears of another U.S. downturn and European debt woes.”

More than $8 trillion has been erased from the value of global equities in the past four weeks on concern the U.S. may enter a recession and as an intensifying European debt crisis evoked memories of late 2008, when credit markets froze after Lehman Brothers Holdings Inc. collapsed.

“Concerns around growth in major economies have now firmly taken hold,” said Asim Bukhtiar, an equity analyst at Riyad Capital. “Investors may be reluctant to add new positions ahead of the Eid holidays.”

The Saudi Arabian market will close on Aug. 27 for the Eid Al Fitr Islamic holiday and trading will resume on Sept. 3.

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

--Editors: Stephen Kirkland, Claudia Maedler

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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