Asian crisis pushes Saudi Stock down to largest fall in 2010
Breaking 6000 points... And expanding the global economy risks
Dealer referring to the sharply decline yesterday by 417 points
A new economic crisis from Eastern Asia emerged thus influenced most of the global financial markets, especially the Saudi market which was deeply harmed yesterday down to 416 points, the biggest loss in 2010, after persistent reports referring to a war between the two Koreas, reflected on the impact of the Chinese currency – slipping about 4 percent against the dollar, causing increasing concern for the petrochemical and oil sectors, and reinforced the downward path of most equity markets.
The global stock market rout reflected on Tadawul on Tuesday as uncertainty in Europe and concerns about the economic recovery pushed confidence down in the Kingdom.
The Tadawul All-Share Index (TASI) plunged 6.75 percent to 5,760.33, led by petrochemicals giant Saudi Basic Industries Corp. (SABIC), after oil prices fell more than $2 a barrel and the euro continued its slide.
The Tadawul index suffered its largest loss in 18 months, heading a rout in Middle East markets as a fall in oil prices sparked panic selling in the world's top crude-exporting region. Shares of SABIC, which makes up one-fifth of Saudi market capitalization, dropped the maximum allowed 10 percent, to close at SR76.75, down SR8.5 from Monday's close of SR85.25. The Saudi petrochemicals index fell 9.4 percent, taking its losses to 27 percent in three weeks, mirroring a 21 percent drop in oil prices over the same period.
Lenders were hammered region-wide, with Al-Rajhi Bank dropping 7.3 percent, Commercial Bank of Qatar falling 5.4 percent and Abu Dhabi Commercial Bank losing 5.6 percent.
Commenting on Tuesday's market plunge, Faisal Alsayrafi, managing director and CEO of the Financial Transaction House (FTH), said: "Tadawul is linked to global markets. The economic turmoil around the world, especially in the US and Europe, affects TASI directly." He also said the falling euro also had an adverse impact on Tadawul.
John Sfakianakis, Chief Economist at Banque Saudi Fransi, said: "The sharp drop is more related to investor repositioning and panic selling which is mostly unjustified as the fundamentals of the Saudi economy are solid and extremely healthy even with oil in the mid $60s range.".
A rise in geopolitical tensions between the two Koreas after North Korean leader Kim Jong Il ordered his military to go on a combat footing exacerbated an already nervous market. "We still have all of the euro zone fears, and there are increased tensions between North and South Korea," said Kim Rupert, managing director of global fixed income analysis at Action Economics in San Francisco.
Oil fell below $68 a barrel as investors fled from riskier assets to dollar safety on growing concerns that the European debt crisis could worsen and damage the still fragile global economic recovery.
Turki Fadak, Member of Exchange Committee in the Jeddah Chamber considered the Saudi market which had opened its transactions yesterday on a strong decline, indicating that the reaction came as a result of the local market and the Gulf particularly "weak" and responding to all the consequences, in terms of rise and fall of the simplest reasons.
Dr. Ali Dakkak, Adviser and an economist, believed that the Saudi stock market was ready to go down due to the impact of the global variables, and speculators taking advantage of that, pointing out that the world is currently experiencing economic and political changes, have caused a state of panic among traders.