Riyadh: Saudi Arabian stocks sank on Sunday after drone strikes at an Aramco facility on Saturday.
The Tadawul All Share Index fell as much as 3.1 per cent at the open, led by Al Rajhi Bank and Saudi Basic Industries Corporation, both of which declined at least 3 per cent. The drop erased this year’s gain and lowered the gauge’s valuation to the weakest since March, before the kingdom’s stocks were included in MSCI Inc’s emerging-market gauge. Equities in Dubai, Kuwait and Bahrain retreated as much as 1.3 per cent.
Stocks later recovered slightly. The Tadawul was trading down 1.42 per cent by 1pm AST (Arabia Standard Time).
This is a “very tense situation,” elevating risk in the region “to unprecedented levels,” said Mohammed Ali Yasin, the chief strategy officer at Al Dhabi Capital in Abu Dhabi.
The attack was the biggest on Saudi Arabia’s oil infrastructure since Iraq’s Saddam Hussein fired Scud missiles into the kingdom during the first Gulf War.
While the incident won’t derail Aramco’s initial public offering, it may impact the company’s valuation, according to the Eurasia Group. “Crown Prince Mohammad bin Salman will push the company to demonstrate that it can effectively tackle terrorism or war challenges,” said analysts led by Ayham Kamel, head of Middle East and North Africa research.
Government funds may swoop in to limit the decline in Saudi stocks, said Joice Mathew, the head of equity research at United Securities in Muscat.
“Being Sunday, foreigner participation may not be in full swing, and that should help government funds intervene more effectively,” Mathew said. If they do, their support “could be identified if we see any sharp recoveries in first 90 minutes of trading,” he said.