Saudi shares dive over 9%

Dubai: Saudi shares plunged 9.2 per cent on Saturday with most blue chips posting across-the-board declines.

Worried investors resorted to panic selling as oil fell below $50 level on Friday and on growing uncertainty about the future of Citi Group.

The Saudi index fell 448.87 points to end at 4,431.57, its lowest since early 2004. Of the 125 listed firms, only two ended higher.

The Arab world's largest bourse is showing its first reaction to the fall of oil prices below $50 per barrel on Thursday for the first time since May 2005. The bourse was closed on Thursday and Friday.

"It's a sellers market with low demand ... The $50 mark is a crucial psychological benchmark for the market," said John Sfakianakis, chief econ-omist at SABB bank HSBC's Saudi subsidiary.

Many analysts fear that oil-based economies like that of Saudi Arabia will not be able to maintain macroeconomic balance and keep up the same public spending spree of the past five years if oil falls below the $50-a-barrel level.

The global crisis is not helping allay these fears.

"The negativity of global equities especially in the US is reflected on the local market, particularly for the petrochemical and banking sectors," Sfakianakis added.

Citigroup's growing troubles were reflected in share prices of Kingdom Holding and Samba Financial Group.

Kingdom Holding's closed at an all-time low of 4.2 riyals, down 9.7 per cent from Wednesday's close while Samba fell 9.65 per cent. Kingdom Holding groups investments by Saudi billionaire Prince Al Waleed Bin Talal and these include a significant stake in Citigroup and a five per cent stake in Samba.

On Thursday, Prince Al Waleed said he began increasing Kingdom Holding's stake in Citigroup to five per cent from less than four per cent.

The bank's largest individual investor called Citigroup's shares "dramatically undervalued". Citigroup is in talks with the US government as its plummeting share price raises doubts about its ability to survive, a person familiar with the matter said.

Goldman not interested

Meanwhile, Goldman Sachs Group is not interested in buying hard-hit Citigroup, even with substantial US government financial support, a person familiar with Goldman's strategy has said.

Citigroup's plunging stock price on Friday fuel-led speculation that the bank would have to find a buyer quickly or sell businesses to stay afloat.

Yet Goldman - whose stock rose 2.5 per cent on Friday and which now has about the same market value as Citi - continues to resist such a deal because it would be disruptive to Goldman's culture and could make it vulnerable to big losses from some of Citi's assets, the source said.

That reluctance has not changed since Goldman Chief Executive Lloyd Blankfein was encouraged by government officials to call Citi CEO Vikram Pandit. The call, which took place in September, lasted less than a minute and neither side was interested, sources said.

- With inputs from Reuters