Saudi Arabia’s benchmark stock index dropped the most in three weeks on investor concern over U.S. budget cuts and a decline in third-quarter sales at Saudi Basic Industries Corp.
The world’s largest petrochemicals maker by market value known as Sabic fell to the lowest level in a week. Al Rajhi Bank, the kingdom’s biggest publicly traded lender, declined for a second day. The Tadawul All Share Index lost 0.5 percent, the most since Oct. 22, to 6,884.29 at the close in Riyadh. The measure gained 2.2 percent last week. The Bloomberg GCC 200 Index of regional stocks and Qatar’s QE Index lost 0.5 percent.
The Stoxx 600 Index dropped 1.7 percent last week and the MSCI Emerging Markets Index lost 1.4 percent on concern the U.S. will slip back into recession if lawmakers fail to reach a budget compromise on the so-called fiscal cliff, which refers to about $607 billion of tax increases and federal spending cuts set to kick in automatically in January. Saudi Arabia relies on oil exports for about 90 percent of government revenue, making it vulnerable to swings in global demand.
“Petrochemical stocks have high sensitivity to news about the global economy,” Turki Fadaak, head of research at Albilad Investment Co. in Riyadh, said by phone. “Any positive news has a good impact on the companies and any negative news has the opposite effect.”
Sabic’s sales dropped to 44.8 billion riyals ($11.9 billion), the company said in a regulatory filing today. Sabic said on Oct. 17 third-quarter profit tumbled 23 percent as prices for its products dropped amid slower global economic growth. Profit has fallen in the past four quarters as the maker of fertilizers, plastics and steel suffers from the effects of slowing growth in developed economies.
Sabic’s third-quarter sales were “a bit below expectations, primarily due to lower petrochemical prices in the third quarter,” Muhammad Faisal Potrik, an analyst at Riyad Capital, said by phone. “Ethylene prices were down 5 percent quarter on quarter, so that also had an impact.” He had estimated third-quarter sales at around 46 billion.
Sabic shares fell 0.6 percent to 90.25 riyals, the lowest since Nov. 5. Al Rajhi declined 0.4 percent to 69.50 riyals.
Elsewhere in the Middle East, Dubai’s DFM General Index lost 0.2 percent and Abu Dhabi’s index slipped 0.1 percent. Kuwait’s gauge gained 0.2 percent. Oman’s MSM30 Index and Egypt’s EGX 30 Index were little changed.
Israel’s TA-25 Index dropped 0.3 percent to 1,208.12 points. The yield on the nation’s 5.5 percent bonds maturing in January 2022 fell two basis points, or 0.02 percentage point, to 3.9 percent.