Oil blues see 7% Tadawul drop The True Path

The Saudi stock market plunged nearly 7 percent on Sunday in relentless selling sparked by falling oil prices and a decision by Fitch Ratings to cut its outlook for Saudi
Arabia’s debt.

The Tadawul All-Share Index lost 6.86 percent to close at
7,463.32 points, nearing support on its December low of
7,226 points.

That brought its losses so far in August to 18 percent — a
drop that has erased some $75 billion of market value,
Reuters reported.

Mohamed Ramady, professor of finance and economics at
King Fahd University of Petroleum and Minerals, said:
“Unfortunately the Tadawul will continue to be lethargic and
might close at around the 6,800-7,000 levels by year end if
oil prices do not modestly rebound and signs of a Chinese
recovery are seen.

Commenting on Tadawul’s drop, Akber Naqvi, executive
director at Al-Masah Capital Management Ltd., told Arab
News: “It is important now to see how Tadawul trades
around its December 2014 lows as that would be seen as a
level of support.” However, he said: “At this stage it is more
important to see where oil will find a bottom because that
will directly determine Tadawul’s next trading range.”

Despite a fall in the Kingdom’s all-important petrochemicals
industry, the real estate, industrial investment, insurance
and banking sectors, the value of traded shares exceeded
SR6.6 billion on Sunday.

Basil Al-Ghalayini, CEO of BMG Financial Group, said: “The
Saudi stocks prices fall do not necessarily reflect the
fundamentals of the underlying companies. Obviously, there
is a panic among short-term traders who are influenced by
frenzy updates via social media channels. Although, the oil
price fall has triggered Saudi budget deficit, this is a normal
development of any business cycle of any economy.”

According to Bloomberg, more than $3.3 trillion has been
erased from the value of global equities since China’s Aug.
11 decision to devalue its currency spurred a wave of selling
across emerging markets.

Dubai stocks sank 7 percent to 3,451 points, its lowest close
since March 30, bringing their loss since 2015’s peak to 18
percent.

“The Saudi market is clearly affected by the renewed
weakness in oil. This in turn is the result of an increase in
general risk aversion, which is boosting the dollar, and the
increasing concern about China’s economic outlook,” a
regional economist, based in Bahrain, said.

He said: “The markets are looking for new policy cues
globally, in particular more dovish tones from the Fed and
new steps by the Chinese authorities to restore market
confidence.

Source:arabnews