Saudi Arabian Stocks Drop Most Since January as Holy Month Nears

  • More decliners on Tadawul than on any day in at least 5 years
  • Equities retreat with oil as Brent crude falls for fourth day

Saudi Arabian stocks plunged the most since January as oil extended its drop, compounding a selloff before the start of Ramadan in June.

The Tadawul All Share Index slid 3.1 percent, the most among world equity gauges, to the lowest level since April 18 as 166 members of the benchmark measure retreated. That’s the most declining companies on a single day in at least five years, according to data compiled by Bloomberg. Jabal Omar Development Co. led the rout, falling 5 percent.

“People are just booking gains ahead of Ramadan and an extended summer break, which is traditionally a slow period in the market,” said Muhammad Faisal Potrik, the head of research at Riyad Capital. “The market had rallied and a correction had been due. Oil has also started to slip and it looks like the oil rally might be over for the short term.”

While the kingdom is seeking to diversify its economy away from oil, equities remain highly correlated to the price of the commodity, which generates most government revenue. Brent crude has dropped four days running, accelerating a selloff before Ramadan starts about June 6. During their holy month many Muslims fast all day and work reduced hours, typically heralding a slowdown in trading activity in the six-nation Gulf Cooperation Council.

Volumes on the main gauge were about 16 percent below the 20-day average. The measure’s 14-day relative strength index dropped to 37, the lowest since February. A reading below 30 is an indicator to some technical analysts a measure may have fallen too fast and be poised to reverse.

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