In the first few weeks of April, the Tadawul, the Middle East’s most liquid equity exchange, had returned to form and bucked the downward trend of developed global markets. But until then, 2008 seemed to be the year of recoupling with western markets, rather than decoupling, as far as the Saudi stock market was concerned.
In the first six weeks of the year, the Tadawul, which trades around $3 billion daily, lost almost 20% of its value. Over the following two weeks it managed to claw back half of that loss, before losing what it had recovered in March.
According to Brad Bourland, head of research at Saudi investment firm Jadwa, this fall was primarily the result of the market having risen too far, too fast, in the last few months of 2007. Indeed, whereas in October the market had been at roughly the same level as at the start of 2007, by January 2008 it had risen almost 50%.
What triggered the downturn at the beginning of the year, says Bourland, were lower than expected earnings reported by the banks and Sabic, the petrochemicals company that is the biggest Saudi stock. In contrast, he says, a lack of bad surprises in certain banks’ first-quarter earnings may have spurred a slight recovery in the first half of April.
