Regional turmoil brings TASI down 5%
Saudi Arabia's Tadawul All-Share Index (TASI) slumped to a nine-month low on Sunday and most Gulf markets also slid due to fears unrest was spreading in the region.
The Kingdom's benchmark fell 5 percent or 313.15 points to 5,950.64 — its lowest level since June 6.
The sector activity for the day was all negative. The losing sectors ranged from 2.70 percent by the cement sector to 7.46 percent by the telecommunication & information technology sector. Overall market breadth for the day was negative with 1 advancer against 144 decliners giving it an AD ratio of 0.006, the Financial Transaction House (FTH) said in its daily market commentary. The stock market turnover for the day reached SR4.92 billion.
Commenting on the Tadawul’s steep fall, John Sfakianakis, chief economist at Banque Saudi Fransi, Riyadh, said such a one-day drop is quite substantial given that there was no significant change in the wider region but maybe this could also be perceived as worrisome.
“There is little doubt that the Gulf region will not remain immune from what is happening in North Africa. Markets have the tendency to act in illogical ways based on imperfect information. What is happening in the wider region is revolutionary so markets could be reacting to such events. In this environment it doesn't take much, in terms of volumes, to push down the market given the low liquidity environment we are in,” he said.
Echoing Sfakianakis’ remarks, Jarmo T. Kotilaine, chief economist at the National Commercial Bank, said: “The sharp correction on Tadawul should be seen primarily as a reflection of greater investor anxiety about the regional situation but also the global economic recovery.
The upward momentum in the oil price is beginning to ignite fears of an adverse impact on demand at a time when the global recovery is still waiting to develop traction. But foreign investors are especially showing signs of a markedly diminished risk appetite vis-a-vis the region. This is adversely affecting the mood in the absence of good news on alleviating or resolving some of the regional stress points.”
Kotilaine said what the region needs above all is a road map toward stabilization, especially in the countries that triggered the crisis. Failing that, uncertainty and contagion fears will keep coming back to test the mood.
Saudi's Arabia's 25 largest stocks fell, including Samba Financial Group down 6 percent, Riyad Bank 5.9 percent and Zain Saudi 10 percent, Reuters said.
Oman's index fell 2.8 percent to a 22-week low as protests in the industrial center Sohar turned deadly.
"Geopolitical risk is the main focus, so company selection is not the biggest priority — it's more about exposure to the region," Reuters quoted Marwan Shurrab, vice president and chief trader at Gulfmena Alternative Investments as saying.
Oil prices hit 29-month highs last week, but have done little to boost sentiment in the world's top crude exporting region.
"Oil hasn't been a primary driver of Gulf equity markets for a while, except in improving margins at petrochemicals producers," Walid Shihabi, Shuaa Securities chief executive, said. "The worry is that rising oil prices might stall a global economic recovery."
Dubai fell 0.9 percent to 1,467 points — its lowest close since Aug. 15. The only gainers in the region were Abu Dhabi and Bahrain. The Abu Dhabi index gained 0.6 percent to 2,628 points, while the measure rose 0.3 percent to 1,437 points.