Saudi market continues the year's downward trend

Riyadh: The Saudi stock market continued its down turn last week amid the modest daily trading value of SAR5 billion (Dh4.89 billion).

The Tadawul All Share Index TASI dipped less than the hurdle level of 5,000, resulting in losses of 6,800 points (-58 per cent) from the year's high on January 12, amid the negative sentiment caused by the declining global markets.

It seems that the majority of investors are still waiting for the storm to pass and for the market to settle down.

Even though most of the stocks are trading at very attractive prices, reflecting very tempting P/E ratios, it reached a historical low between (8-4) in the Petrochemical Industries, Real Estate Development and Industrial Investment sectors.

Meanwhile, the serious fears circulating around the Petrochemical Industries have shocked the prices of their listed stocks with exaggerated impact, resulting in a historic low P/E level. For example, even with amplified assumption that profits will decrease by 50 per cent in the 2009 financial year, the forward P/E ration is ranged between (9-7).

This range still makes this industry attractive especially if compared with other stocks in the local market or with other stocks in same industry listed in global equity markets, where their current P/E is around (15-13). Moreover, it seems that the fundamentals are not the main driver in the current market conditions, amid the markets volatility while earning capital-gains through speculation trades or short term investments is nearly impossible. Investors should make the best of the current markets condition by taking advantages of the very attractive stock prices and build a long term investment strategy.

The TASI closed at 4,880.44 on November 19, down 11 per cent from the previous week. As of Thursday, it was 55.8 per cent lower than at the beginning of the year. Trading value reached 24.4 billion riyals, down against last week's 24.9 billion.

The market is expected to keep moving near to the 5,000 level as investors await new incentives to enhance market confidence and inject liquidity. However, eyes are still focusing on coming financial year 2008 corporate result to re-evaluate the global crisis' impact on Saudi companies' outlook.