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Riyadh, Saudi Arabia: The Saudi Stock market began the week with a 5 per cent decline on Saturday, September 6, 2008 coinciding with the new market pricing mechanism that was announced and that would take effect on September 13, 2008.
The market reaction was hugely unexpected since the new halala-based system would increase liquidity and would better price stocks below the SAR 50 riyal mark. New market entrants took advantage of the low prices during the rest of the week as trading value increased and multiples were attractive.
Investor confidence seemed to be frail even with undervalued prices in the stock market; maybe the financial results of Q3 along with the stabilization of the price of oil would be the factors that would restore that confidence.
Tying the price of oil directly with stock market performance is a mistake that often happens in the Saudi market whereas a closer examination of the price of oil and the profits announced by SABIC for example would tend to prove otherwise. By comparing Q2 2007 results with oil at $75 and profits at SAR 7.4 billion a barrel with Q2 2008 with oil almost doubling and profits at SAR 7.6 billion would be case in point.
OPEC announced this week that it believed a $100 a barrel oil was a fair price and that it had no intention of decreasing production putting downward pressure on the WTI Barrel of oil which closed down 5.8 per cent on the week at $103.2 on September 9, 2008.
TASI registered 8128.10 points on Wednesday, September 10 closing, down by 4.4 per cent from last week. As of today, TASI is 26.4 per cent lower than year start. Trading value reached SAR 24.9 billion, up against last week's SAR 16.4 billion. "SABIC" dominated trading value at 16 per cent followed by "Petro Rabigh" and "MA'ADEN" both at 9 per cent.
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