The Saudi stock market (Tadawul) had a steep fall as crude oil futures fell sharply on Monday.
The plunge was a 29-month low which erased more than SR375 billion (100 billion) of market value.
The Tadawul All-Share Index dropped 5.88 percent to 7024.6 points breaking major technical support on its December low of 7226 points.
The value of traded shares reached SR7.83 billion on Monday despite big drops in petrochemical industrial investment and real estate sectors.
The Tadawul index which plunged 6.9 percent on Sunday has now lost 23 percent in August erasing more than 100 billion of market value Reuters reported.
James Reeve deputy chief economist and assistant general manager at Samba Financial Group told Arab News that most global stock markets have been oversold and there will be some bounce back especially in the United States and Europe.
‘The Tadawul has also been oversold a bit but the economy is slowing and the outlook for corporate profits growth is not good. Therefore any rebound in the Tadawul is likely to be minor’ he said.
Commenting on impact of oil price fall on Gulf countries Reeve said: ‘Saudi Arabia Kuwait the UAE and Qatar all have substantial financial buffers to support government spending. However these countries especially Kuwait and Saudi Arabia need to intensify efforts to diversify their economies away from oil.’
He added: ‘Bahrain and Oman have much smaller financial buffers and are vulnerable.’
Brent October crude was down 2.33 at 43.13 a barrel and US October crude fell by 1.94 to 38.51.
John Sfakianakis Middle East director at Ashmore Group said: ‘It’s hard to tell where the market is going but some very good opportunities in sectors and specific companies are becoming evident now. Economies are being impacted by oil but it takes time for the feed through to happen immediately. The average Gulf citizen has yet to feel the pinch from the oil price fall.’
However Mohamed Ramady professor of finance and economics at King Fahd University of Petroleum and Minerals advised Saudi investors to stick firm and take a long-term view of Saudi stock market.
‘Follow foreign investors’ analysis of which sectors are undervalued and remember that whatever happens abroad Saudis will still want housing food transport and utilities and these sectors will remain steady’ he added.
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