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Saudi stock market sees 21.5% decline in 3 months - ASHARQ AL-AWSAT English Archive
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Saudi investors monitor stocks at the newly opened exchange market department at the National Commercial  Bank (NCB) in Riyadh on November 12, 2014. (AFP/Fayez Nureldine)

Saudi investors monitor stocks at the newly opened exchange market department at the National Commercial Bank (NCB) in Riyadh on November 12, 2014. (AFP/Fayez Nureldine)

Riyadh, Asharq Al-Awsat—Saudi Arabia’s stock market has witnessed a significant decline of 21.5 percent, after peaking 90 days ago, following a sharp drop in oil prices after OPEC announced it would not be cutting output earlier this week.

Saudi Arabia’s stock market peaked at around 11,200 points earlier this year, falling to just 8,900 points less than three months later.

Despite the decline, economists have said that Saudi Arabia’s stock market has managed to push through technical reforms that will have a positive impact on trading in the first quarter of 2015, including preparations to open the stock exchange to foreign investors.

Economic expert Faisal Al-Aqqab told Asharq Al-Awsat that many companies and individuals have been confused by the erratic changes in the Saudi stock market but that the new reforms will help stabilize the market.

“The picture regarding the future of the Saudi stock market remains unclear in the next period, but I believe that the entrance of foreign companies into the market will serve as a major catalyst,” he said.

Aqqab stressed that Saudi Arabia’s stock market must not fall below 8,500 points, warning that this represents an important red-line for market confidence.

Khaled Al-Sultan, a Saudi businessman who has been involved in investing in the Saudi stock market since 2001, said: “We are confident in the capabilities of the Saudi economy . . . what is happening now represents an exaggerated effect by the petrochemicals sector which has witnessed a severe decline in prices.”

Observers agree that the sharp drop in the Saudi stock market is the result of oil prices hitting a more than four year low with Brent crude currently standing at 70.15 US dollars per barrel. Oil prices fell further on Thursday on the back of an OPEC announcement that there would be no change in its production plans.

The 12-member Organization of Petroleum Exporting Countries took the decision to maintain oil production at 30 million barrels per day on Thursday following the group’s annual meeting in Vienna despite what many consider to be a production glut in recent years following a boom in US Shale oil production.

Over the past two weeks, the Saudi Basic Industries Company (SABIC), the largest public company in Saudi Arabia, saw its shares drop by 5.22 percent. While the company’s shares were worth approximately 310 billion Saudi riyals (82.6 billion US dollars) fourteen days ago, that had dropped to 293.8 billion Saudi riyals (78.3 billion US dollars) on Saturday.

The news comes as SABIC CEO Mohamed Al-Mady announced that his company will seek to launch new projects in North America in early 2015, taking advantage of the Shale revolution.

In exclusive comments to Asharq Al-Awsat on the sidelines of the Gulf Petrochemicals and Chemical Association (GPCA) forum in Dubai, Mady said that SABIC will announce its new projects in the near future in cooperation with Saudi Arabia’s Capital Market Authority.