Saudi Arabia’s stock market fell sharply for a second straight day yesterday, leading the entire region down, in response to weak oil prices and government austerity measures.
The Saudi equities index, which had retreated 3.8% on Tuesday, sank a further 3.4% to 5,534 points, its lowest finish since January 21.
It has tumbled 19.5% from a peak in April.
Trading volume climbed to a two-month high as the index fell below technical support on the February low of 5,551 points, though it closed off its intra-day low.
It has stronger support at the January low of 5,349 points.
Brent oil futures had fallen about 3% to around $46 a barrel on Tuesday after Iran rejected an offer from Saudi Arabia to limit its oil output in exchange for Riyadh cutting supply.
This hit petrochemical stocks, with Saudi Basic Industries sliding 4.0% yesterday.
PetroRabigh outperformed the sector, dropping only 2.1%, after saying it would proceed eventually with a rights issue that has been delayed since 2015.
The Saudi insurance sector also suffered after the government said this week that it would reduce bonuses and perks for public sector workers; insurance stocks are favoured by local retail investors, who will have less disposable income because of the austerity drive. “In Saudi Arabia it is very common to see an average public sector employee trading in the stock market, because someone from his family once made a fat profit — but those days are long gone now.
They simply won’t have the financial flexibility with these austerity moves,” said a Jeddah-based broker.
Among other stocks directly exposed to consumer sentiment, travel agent Al Tayyar plunged 8.2%.
Some telecommunications firms and utilities, seen as defensive shares, performed relatively well and Zain Saudi was one of only four rising stocks, gaining 3.1%.
Dubai’s index fell 0.4% in thin trade as Emaar Properties lost 1.0%.
Abu Dhabi dropped 0.5% with another real estate firm, Aldar Properties, falling 1.5%.
In Egypt, the index dropped 0.5% in a broad-based decline.
But textile producer Kabo jumped 10% in its highest trading volume since January after posting a 14% rise in net profit for the year to June 30.
Elsewhere in the Gulf, Kuwait index fell 0.2% to 5,402 points; Oman index slipped 0.4% to 5,726 points and Bahrain index edged up 0.2% to 1,142 points at the close yesterday.