Foreigners sold a net 4.01bn riyals ($1.07bn) in Saudi stocks in the week ending October 18, exchange data showed yesterday — one of the biggest selloffs since the market opened to direct foreign buying in mid-2015.
The selloff came during a week when investors were rattled by Saudi Arabia’s deteriorating relations with foreign governments following the disappearance of journalist Jamal Khashoggi.
Riyadh said on Saturday that Khashoggi died in a fight inside its Istanbul consulate, its first acknowledgement of his death after denying for two weeks that it was involved in his disappearance.
A breakdown of the exchange data showed foreigners sold 5bn riyals worth of stocks and bought 991.3mn worth. “The market started to price in a fundamentally different relationship between Saudi Arabia and the US,” said Jaap Meijer, head of equity research, at Arqaam Capital.
“We believe the US will keep Saudi Arabia as its close ally given (amongst other things) the importance of the kingdom in the Middle East region and being the producer of 10% of the world oil supply.”
US Treasury Secretary Steven Mnuchin said yesterday that Saudi Arabia’s explanation of the killing of journalist Jamal Khashoggi was a “good first step but not enough”, adding it was premature to discuss any sanctions against Riyadh over the incident.
The comments were the latest from the administration of US President Donald Trump that appear aimed at censuring a killing that has sparked global outrage, while protecting relations with the world’s top oil exporter.
The stock exchange data also showed Saudi individual investors such as retail investors and high net worth individuals sold a net 3.4bn riyals worth of stocks during the week, however Saudi institutions bought a net 7.8bn riyals worth of stocks.
Investors from other Gulf countries were also net sellers.
Market analysts told Reuters last week that state-linked funds appeared to have mounted an operation to support the stock market after heavy foreign selling.
The Saudi stock market is down about 4% since Khashoggi disappeared on October 2. The market had already started to weaken before the incident as foreign funds slowed their buying after MSCI’s announcement in June that the kingdom will be included in its global emerging market benchmark next year.
The Saudi index closed up 0.2% at 7,660 points yesterday after falling as much as 3.5% earlier in the session.
Saudi Arabia’s foreign debt has also been pressured, with yields rising across the the country’s dollar bond curve.
The yield on Saudi Arabia’s $5.5bn bond due in 2026 and $6.5bn note due in 2046 rose to record highs last week, according to Refinitiv data.
Saudi credit default swaps, which investors buy as protection against default, rose to 100 basis points late last week for the first time since June, data from IHS Markit showed.
Egypt’s blue-chip stock index fell 0.9% to 13,525 points yesterday after the government signalled a delay to its public share sale programme.
The government said on Friday it would postpone a planned offering of 4.5% of tobacco producer Eastern Co, the first of several share sales including initial public offerings that were expected before the year-end.
The Dubai index slumped 0.8% to 2,735 points, with Dubai Islamic Bank falling 1.9% and market bellwether Emaar Properties dropping 0.8%. In Abu Dhabi, First Abu Dhabi Bank slipped 1.4%, while Emirates Telecommunications Group (Etisalat) dipped 0.6%. Abu Dhabi’s main index closed down 0.9% to 4,943 points.
Elsewhere in the Gulf, the Kuwait index lost 0.1% to 5,169 points, the Bahrain index fell 0.1% to 1,322 points and the Oman index shed 0.2% to 4,453 points.
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