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The Saudi stock market saw unprecedented swings last week with three of the top five worst-ever falls, and two of the top five highest daily increases since the launch of the index in 1985.
Bakheet Financial Advisors said that this sharp volatility was due to speculative trading and was not built on a solid investment basis. The leading brokerage reported. 'We believe that the end of the road is near and that soon to be published financial results will be the main driving engine for the market trend.'
The sharp falls accelerated in mid-week and broke the index 4,000 support level and hit a low value for more than eight weeks. At that time the general mood was that the market had bottomed out. Then a buying spree followed with the market jumping by 8.4% on Wednesday, its highest daily increase ever.
OPEC's decision to cut output by 900,000 bpd on Wednesday did not have the stimulatory effect that might be expected, and on Thursday the Tadawul All Shares Index closed 2.1% down for the week at 4,280.66 points.
From an outsiders' perspective this seems to show that the Saudi stock market has lost touch with fundamentals - such as the oil price - and has become a market driven by liquidity and momentum. This may continue for sometime but experience suggests that investment bubbles do not last forever.
Saudi bourse turns very volatile
Last week's high volatility in the Saudi bourse, something the market has never seen before, could suggest that the 70 per cent rise in the market so far this year is ripe for a correction.
Saudi Arabia: Saturday, September 27 - 2003 at 09:43
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Peter J. CooperSaturday, September 27 - 2003 at 09:43 UAE local time (GMT+4)
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This Article was updated on Wednesday, October 08 - 2003
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