The index, which had plunged 6.9 percent on Sunday, has now lost 23 percent in August, erasing more than $100 billion of market value.
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Basil Al-Ghalayini, CEO of BMG Financial Group, said: “The Saudi stocks prices fall do not necessarily reflect the fundamentals of the underlying companies”. Considerations about slowing progress on the earth’s second-largest financial system shook markets all over the world and drove the U.S. inventory market to its largest drop in nearly 4 years on Friday. Maintenance of oil output has secured market share and proved devastating for US onshore drilling. When that happens, there may be substantial buying back of stocks in markets such as the UAE, where valuations have reached attractive levels, he said. “Build a new portfolio slowly and strategically and over the medium to long term current entry points may turn out be a smart investment decision”.
The kingdom as most other Persian Gulf states depends largely on hydrocarbon sales to fund massive local spending that has driven solid growth in the past decade. The oil markets, having recovered nicely in the spring, have experienced another relapse. “This region will continue to import from China and will now do so at a discount”.
However, Opec will have to make room for the Iranian barrels if it wants to maintain a semblance of unity and Saudi Arabia is unlikely to rein in its own production for the economic benefit of its main political rivals in the Middle East. Instead of waging a price war against US shale drillers and Russian Federation , Saudi Arabia has effectively orchestrated a strategy that is now tearing Opec apart from within. They’re in the oil business. Merheb said, however, that it was by no means clear where Dubai’s market would bottom. “Unless and until things are clarified in a more positive direction, the markets are likely to experience bouts of volatility”. “This in turn is the result of an increase in general risk aversion, which is boosting the dollar, and the increasing concern about China’s economic outlook”, a regional economist, based in Bahrain, said. And a potential slowdown in Chinese demand for commodities dragged oil prices lower amid increasing consensus that cheap crude is here to stay.
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Saudi Arabian equities were poised to enter a bear market in Riyadh after the index fell 23 per cent from a recent peak.
