FT - 19/4/2006

The Saudi stock market plunged another 8 per cent on Tuesday, taking its fall over the past nine days to 26 per cent.

Other Middle Eastern markets were hit, with the Dubai Exchange falling 3.1 per cent, Qatar 2.1 per cent and Egypt 2 per cent.

The Tadawul All Share index was trading at 12,994 late Tuesday, compared with 17,557 at the close of trading on April 9. It has fallen 37 per cent from its February peak to its lowest level for eight months.

Analysts said it was a dramatic reversal after the oil-fuelled boom that led to spectacular share price gains in 2004 and 2005 and saw up to 3m retail investors piling into the market in search of quick wealth.

Oliver Bell, senior investment manager at Pictet Asset Management in London, said the market still appeared to be over-valued.

“We estimate the Saudi market is trading on a forward multiple of nearly 30 times 2006 earnings. Despite the correction, valuations are still at extreme levels compared to other emerging market opportunities,” he said.

A Gulf analyst, who declined to be named, said the market was still feeling the impact of a clash between the Saudi market regulator – the Capital Market Authority – and two speculators that were accused of manipulating the market this month.

Worries about a possible confrontation over Iran’s nuclear programme also weighed on sentiment, dealers said.

Mr Bell said some of the large Gulf investors who had made “massive returns in the last two or three years” would still make healthy profits even if they sold at current levels.