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Tadawul index drops 7.4% as renewed US-China Trade War tensions increase uncertainty

Renewed tensions between the US and China, coupled with the continued impact of the global pandemic, have sent the Tadawul stock exchange, among others, plummeting.

All but one of the 195 listed stocks on the Arab world's largest bourse were in the red In an interview with Al Arabiya, Saudi Finance Minister Mohammed al-Jadaan said on Saturday that "painful" measures may need to be taken On Thursday, Saudi Jadwa Investment company expected the kingdom to record a budget deficit of $112 billion this year

Saudi Arabia’s Tadawul index, the region’s largest stock exchange, fell a significant 7.4% on Sunday after lingering concerns regarding COVID-19 and increasing tensions between the US and China dampened investor sentiment. In times of fear, finger pointing finds popularity as the world’s nations look for someone to blame for their plight. 

This has been the case between the US and China, whose relationship was called into question following renewed threats of tarrifs by US President Donald Trump on Friday. Things were compounded again on Sunday, when US secretary of state, Mike Pompeo, claimed on Sunday that there is “enormous evidence” the COVID-19 outbreak originated in a Chinese laboratory in an interview with ABC – but did not provide any of the alleged evidence.

These events were enough to rattle markets worldwide as fears of renewed US-China Trade War tensions would intensify once more despite the two countries having signed a Phase One agreement back in January.

The Saudi Tadawul index was not the only one impacted. London’s FTSE 100 also slipped 0.5% in early trading, according to the Financial Times, in addition to the Stoxx Europe 600, which tracks Europe’s largest companies, sliding by 2.1%.

In the case of Tadawul, Saudi shares tumbled on Sunday, a day after the finance minister announced “painful” measures to tackle the economic impact of the coronavirus pandemic, AFP reports

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“The Tadawul stock market closed the day a huge 7.4% lower, as all but one of the 195 listed stocks on the Arab world’s largest bourse were in the red,” AFP explained. Oil giant Saudi Aramco was not spared either, dipping 5.2% on Sunday too as it faces falling oil demand and prices. 

In an interview with Al Arabiya, Saudi Finance Minister Mohammed al-Jadaan said on Saturday that “painful” measures may need to be taken for the sake of the country and its citizens.  He also said that the government may need to redirect some public funds to support the health sector in coming quarters. 

Al-Jadaan also said that he expected that Riyadh could lose half of its oil income, which contributes about 70% of public revenues, as oil prices have shed two-thirds of their value since the start of the year. 

For a country that still relies greatly on oil revenues, this threat cannot be understated. On Thursday, Saudi Jadwa Investment company expected the kingdom to record a budget deficit of $112 billion this year. In order to help cover this deficit caused by the ongoing global crisis, the Finance Minister said the country might borrow $60 billion.

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