Saudi stocks retreat as investors dump Sabic shares

A rush of selling by shareholders of the country's largest listed company led the market down.

Saudi Arabia's stock exchange slumped 9.2 per cent yesterday, led by a rush of selling by shareholders of the country's largest listed company. The Saudi Basic Industries Corporation (SABIC) announced it had shut down a key petrochemical facility in the Netherlands and would not reopen the plant until market conditions made it economically viable. SABIC shares fell 9.5 per cent on the Saudi Tadawul exchange, hitting a four-year low. The company's stock price has tumbled by 73 per cent this year.

As the only GCC exchange open for trading on a Saturday, the Tadawul is often seen by investors as a leading indicator of the week ahead on other Gulf bourses. Last week, foreign investors continued a long-running trend of net selling on the Dubai Financial Market (DFM), pushing it to its lowest level in four years. "Investors are panicking due to the global crisis," said Abdulla al Aqil, a trader at Samba Financial Group in Riyadh.

Several stocks, including the Saudi British Bank, dropped in price by the maximum allowable rate of 10 per cent, leading to a suspension in their trading. SABIC, which makes basic industrial commodities, is being hit hard by falling demand in a slowing global economy. It has cut its price for steel, one of its major products, by 60 per cent since September. Local investors were "awaiting new incentives to enhance market confidence and inject liquidity into the market", according to a note released on Wednesday by the Riyadh-based Bakheet Investment Group. Full-year earnings reports, due early next year, could help build confidence, it added.

The falls in the Arab world's largest exchange came despite a rally the previous day in New York, where traders pushed the benchmark S&P 500 Index up by more than 6 per cent. The buying was spurred by the announcement that Timothy Geithner, who is the president of the Federal Reserve Bank of New York, was nominated to be the US Treasury secretary in the Obama administration. The gains were made despite a looming crisis at Citigroup, which has been unable to restore investor confidence despite announcing that more than 50,000 jobs will be cut. Last week its stock dropped by 49 per cent in two days of trading.

"What's happening with Citigroup and General Motors, all global news, is having a major impact on our local market," Mr Aqil said. [e-mail] * with Bloomberg