Saudi shares hit by record fall

RIYADH - Saudi shares suffered their sharpest ever one-day plunge on Saturday as a wave of selling unleashed by a crackdown on market manipulation drove the index to six-month lows.

The main stock index of the Arab world's largest bourse ended at 14,376.01 points, its lowest close since October.

The decline of 8.4 per cent was the steepest in a single day since 1998, according to Reuters data.

"There is fear in the market. People are scared to see the market going down," said Abdelmounaim Addas of Zad Investment.

The index fell 18 per cent in the four trading days since April 9, when two dealers were suspended.

"In the cases of several blue chips, we are getting close to levels that may prompt a rush in margin calls," said Yassine al-Jafri, a Jeddah-based university economist.

Brokers said wealthy speculators triggered the sell-off fearing their grip on the bourse was threatened.

Addas said some of those funds had pushed the market down during Saturday's morning session, but by evening the decline was driven by panic-stricken retail investors.

"This is the only market in the world, of this size, that does not have research, so there is no benchmark as to where to stop buying or selling," said Hani Baothmane, managing partner in al-Khabeer Financial Consultancy.

The volume of speculative capital in Saudi Arabia is huge, swollen by record oil revenues. Managers of massive private portfolios, often acting in concert, have enormous clout in a market that has little institutional capital.

Before the latest downturn, funds had invested about 150 billion riyals ($65 billion) in a market that was then worth more than $950 billion.

Market liquidity depends on large speculators and with most staying on the sidelines during late trading, the day's turnover came in at 8.06 billion riyals, about one-fifth of the levels seen during the market's record-breaking rally early this year.

Traders said Saturday's early selling was similar to that seen last week with speculators focusing on industrial, cement and electricity companies that carried out a 5-for-1 share split over the weekend.

"Speculators want to play on market nerves and [trigger more selling in] these coveted stocks," said one senior Saudi trader of the morning session.

Petrochemical giant Saudi Basic Industries, the market's largest company, fell by almost the maximum 10 per cent allowed in a single day.

- REUTERS