The Saudi stock index was down 2.7% on Wednesday and slid a further 1.3% yesterday.

Reuters/Dubai

Worries that Saudi Arabia may cut subsidies and state spending and raise taxes to cover its budget deficits in an era of cheap oil once again hurt its stock market yesterday, with a negative effect on neighbouring markets.
The International Monetary Fund said on Wednesday that Riyadh was considering a wide range of fiscal reforms - many of which could hurt corporate profits, at least initially - to cope with a budget gap that would total well over $100bn this year.
That pushed the Saudi stock index down 2.7% on Wednesday and it slid a further 1.3% yesterday. Petrochemical blue chip Saudi Basic Industries dropped 1.2%; the government could raise money by lifting subsidised, ultra-low gas feedstock prices for the industry.
Banks were also weak with Alinma, the most heavily traded stock, down 2.1%.
After dropping back in late August and September, five-year Saudi credit default swaps, used to insure against the risk of a sovereign debt default, have resumed rising and are around three-year highs above 130 points.
That level implies a probability of default of less than 10%, but it still indicates Saudi Arabia is more likely to default than the Philippines, whose CDS are at 106 points.
Telecommunications firm Etihad Etisalat (Mobily) plunged 10.1% after reporting a surprise third-quarter loss that it attributed to rising expenses, even though it slashed its capital spending.
Rival Zain Saudi tumbled 4.0% after reporting a narrower third-quarter loss that matched analysts’ forecasts.
There were several gainers among the 10 most active stocks, however. Miner Ma’aden added 2.1% while Atheeb Telecom climbed 1.9% after reporting a 3.6mn riyal ($960,000) net profit for the third quarter, which was only its second quarterly profit since the start of 2012.
The UAE and Qatar have stronger finances and are much more able to cope with cheap oil than Saudi Arabia, but a Saudi economic slump could hurt investor and consumer sentiment across the region.
Dubai’s stock index dropped 1.0% yesterday. Construction firm Drake & Scull, which has considerable business in Saudi Arabia, fell 1.6%.
Abu Dhabi slid 1.0% as real estate developer Aldar Properties sank 3.3%.
Egypt’s index dropped 0.8% as liquidity migrated from other stocks to property developer Amer Group , which resumed trading after a three-day suspension as it split into two firms.
Amer itself swung widely before closing down 7.1% in its heaviest trade since February 2014. The new firm, Porto Group, was by far the market’s most active stock and last traded at 0.42 Egyptian pounds after fluctuating between 0.36 and 0.43.
Elsewhere in the Gulf, Kuwait’s index edged down 0.2% to 5,781 points; Oman’s index edged down 0.2% to 5,906 points, while Bahrain’s index rose 0.4% to 1,254 points.