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Shares tumbled almost 6 per cent on the Saudi bourse on Saturday in a wave of speculative selling unleashed last week by a crackdown on market manipulation.
The main stock index of the Arab worlds largest bourse closed the morning session 5.99 per cent down at 14,775 points, having fallen as much as 8.58 per cent earlier in the day.
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Arab stock markets are expected to maintain their cautious approach in the coming couple of weeks with offshoots from a historic Saudi nosedive leaving their impact on investors throughout the region, analysts said yesterday.
"I believe the plunge at the Saudi stock market last week will continue to affect other regional bourses," an Amman-based portfolio manager said.
"In addition, I think investors will be monitoring more first-quarter results in order to decide what positions to take. This means trading in the coming weeks will focus on selective shares with promising performance," he added.
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WHEN Saudi stocks crashed in March, the Saudi authorities reacted with two ad hoc measures: allowing resident foreigners of Saudi Arabia to invest in the local stock market, and enabling stock splits so that the price of individual shares became more appealing to small retail investors. Both measures were meant to increase liquidity and stabilize a badly shaken market. While these measures might have managed to cheer up investor sentiment in the short run, there is no reason to believe that foreigners will buy Saudi stock in any meaningful quantities at current valuations.
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Saudi Arabia intends to establish two large petrochemical projects in the twin industrial cities of Jubail and Yanbu at a total cost of SR23 billion, Petroleum and Mineral Resources Minister Ali Al-Naimi announced yesterday.
The Jubail project would be implemented in cooperation with European, Japanese and American companies, he said. "A large part of its capital will be floated for public subscription, in coordination with the Capital Market Authority," he added.
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Current high oil prices, and the belief in the markets that they will continue to be at much higher levels than the so-called OPEC price bands of under $30 a barrel, should be a cause both for satisfaction well as a period in which to reflect on what to do with the surpluses. It was only a few years ago that oil prices were under pressure, and Saudi Arabia was running large domestic borrowings to finance government expenditures. There have been encouraging signs that some positive actions are now being taken by the government concerning current budget surpluses.
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Saudi stocks tumbled to an eight-month closing low yesterday as a tentative rebound ran out of steam and private funds dumped shares, prompting panicky retail investors to bail out too.
The main Saudi index ended 3.93 per cent lower at 14,203.74 points, its lowest close since August 13 and more than 32pc below its peak in February. Earlier in the session, the index dropped as low as 13,779.59 points, breaking below the 14,000-point level for the second day running.
The heavy fall will cast a shadow over other Gulf bourses today - most gained ground yesterday, buoyed by a tentative Saudi recovery in morning trade, and were closed by the time Riyadh shares resumed their sharp decline.
Markets across the region have been nervously watching the Saudi bourse since it began taking a battering a week ago. The crash was prompted by a struggle between wealthy speculators and regulators trying to stamp their authority on the bourse. "Investors may be panicked," said Hani Baothmane, managing partner in Al Khabeer Financial Consultancy. "Nothing justifies whats happening. The good side is that turnover is relatively (strong) so there are people who are actually buying."
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Saudi Aramco the worlds largest oil corporation has discovered a new gas field in the Saudi territorial waters in the Arab Gulf, this was announced by minister of petroleum and mineral resources Ali Al-Naimi.
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Saudi shares plunged to their lowest close since July yesterday, dragging all Gulf markets down, as a crash sparked by a struggle between wealthy speculators and regulators showed no sign of letting up.
The Saudi all-share index ended down 7.62 per cent at 13,121 points, its lowest finish since July 31, having earlier fallen as much as 9.87 per cent to below 13,000 points. The market is 37 per cent below the record peak reached in February.
Analysts said many of the 3 million retail investors who had seen the Saudi bourse as a route to quick wealth, after it rose by more than 100 per cent last year, had deserted the market, burned by the crash and fearful that more losses were in store.
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Dubai shares dropped more than 3 per cent on Tuesday as investors took their cue from another morning tumble on the Saudi bourse and dumped key stocks including mortgage lender Amlak Finance.
Dubais main index closed at 624 points, down 3.1 per cent, while Abu Dhabi inched 0.31 per cent lower to close at 4,130 points.
The Dubai index has now fallen almost 13 per cent since its close on April 9, the last trading day before Saudi shares began their latest downturn. In that time Abu Dhabi has fallen almost 9 per cent.
"There is no fundamental reason why UAE markets are falling," said Shakeel Sarwar Butt of Securities and Investment Company in Bahrain. "Our view is that it is purely sentiment-driven."
Sarwar cited the decline in Emaar Properties, the UAEs largest listed company and the most heavily traded stock yesterday. Emaar fell 3.3 per cent to Dh15.90 ($4.33), and is trading under 15 times estimated 2006 earnings.
"Those should be very attractive valuations," said Sarwar.
Analysts said at the time that the results were not strong enough to justify the current share price of around 90 times estimated 2006 earnings.
But Hany Hussain, portfolio manager at Dubai-based Mashreqbank, said yeserdays decline in Amlak and other stocks had little to do with earnings. "We are a victim of what happened in Saudi this morning," he said, pointing to the 1.3 per cent drop in Dubai Islamic Bank, which reported a 118 per cent increase in first quarter earnings after trading closed on Monday.
The shares closed at 15.10 dirhams.
"It is a matter of concern that investors are selling shares in response to good news. It just shows how bearish sentiment is," said Hussain.
Trading in Abu Dhabi followed a similar pattern, with investors dumping shares in First Gulf Bank even though it reported a 252 per cent rise in first quarter net profit last week. The shares closed at Dh16.15, down 3.87 per cent.
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UAE shares fell to their lowest levels in more than three weeks on Saturday as some investors sold Dubais Emaar Properties after its first quarter results failed to meet their expectations.
The main Dubai index ended 3.71 per cent down at 653 points, its lowest close since March 23. The Abu Dhabi index dropped 1.09 per cent to finish at 4,300, its lowest since March 16, according to Reuters data.
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