Saudi bourse crashes amid investor concerns over Khashoggi case

Saudi Arabia’s shares plunged as much as 7% yesterday as investors worried about deteriorating relations with the international community after the disappearance of Saudi journalist Jamal Khashoggi.

The index suffered its biggest intraday decline since December 2014, when oil prices were crashing, with the Gulf region’s biggest petrochemical producer, Saudi Basic Industries, tumbling as much as 7.9%. By the close, the market had recovered some of its losses, ending down 3.5% at 7,267 points. Saudi Arabia’s stock market is due to be reclassified by MSCI as an emerging market next year.

“It’s the political environment. The market is reacting negatively to sentiment around the Khashoggi case and the political noise around it,” said Salah Shamma, head of investment for the region at Franklin Templeton Emerging Markets Equity, a big global fund manager.

The Saudi exchange reported that foreigners were net sellers in the market in the week ended October 11.

Foreigners sold 1.62bn riyals worth of shares, and bought 995.8mn riyals.

Regional traders said speculation the Khashoggi case might deter some inflows of foreign investment — and that a backlash in the US Congress could lead to US sanctions against some Saudi individuals — had triggered panic selling of stocks by some local investors. “It seems that international accounts are punishing the Saudi exchange,” a regional broker added.

Khashoggi, a prominent critic of Riyadh and a US resident, disappeared on October 2 after visiting the Saudi consulate in Istanbul. Turkey believes he was deliberately killed inside the building and his body removed. Riyadh has dismissed the claims.

US President Donald Trump said on Saturday there would be “severe punishment” for Saudi Arabia if it turned out that Khashoggi was killed in the consulate.

Media companies and some technology executives have pulled out of a major Saudi investment conference scheduled for next week in Riyadh because of growing outrage over the disappearance.

Other stock markets in the Gulf were dragged lower, with the Dubai index sinking 1.5% to 2,714 points.

State-owned Abu Dhabi National Oil Co’s (Adnoc) listed unit, Adnoc Distribution, declined 3.5% even after shareholders approved an interim dividend of 0.06 dirhams a share. The Abu Dhabi index dropped 0.7% to 4,931 points.

In Egypt, the blue-chip index rose 1.9% to 13,537 points. Shares of Egyptian property developer Medinet Nasr rallied 10% after property firm Sodic said it intended to make a tender offer to acquire the company through a share swap.

Oman’s benchmark rose 0.2% to 4,497 points, lifted by HSBC Oman which reported a nine-month profit of 25mn rials, compared with 13.7mn rials the same period a year earlier.

Shares of HSBC Oman rose 3.4%. Kuwait’s market declined 1.9%, weighed by banks and Zain Group after regional investment bank EFG Hermes cut its target price for the company by 2% to 0.46 Kuwaiti dinars.

Elsewhere in the Gulf, the Kuwait index shed 1.9% to 5,159 points and the Bahrain index was largely unchanged at 1,316 points.

A sign is seen at the reception of the Saudi Stock Exchange, also known as the Tadawul, in Riyadh. By the close yesterday, the Saudi market recovered some of its losses, ending still down 3.5% at 7,267 points.