MENAF - 13/7/2006

The Saudi stock market has started a downward trend for the last few days despite major listed companies announced good half-yearly results. The Tadawul All-Share Index (TASI) plunged 392.33 points or 3.2 percent yesterday to close at 11,868.42. The index plummeted 1,277.39 points in the last four days of trading and 28.99 percent since start of the year.

The TASI dropped 355.70 points on Sunday, 420.51 points on Monday and 108.85 points on Tuesday.

The market turnover was slightly over SR16 billion as only four companies were in positive territory while shares of 77 companies declined yesterday. All sector indexes were in the red yesterday.

A financial analyst Muhammad Hatrash said that the current downward trend in the stock market could be considered as a coerced fall engineered by market manipulators. He said the market manipulators chose some ploys to reach their goals through shortcuts that made the general indices fall. On the other hand, he viewed "it is imperative that the market should surge as it has not recovered from its last historic fall."

Ayman Samman, another stock market analyst, also attributed the current stock market pressures to some deliberate moves. He explained that the methods used by market manipulators are supply of shares that would apply pressure on leading shares which are generally the focus point at the closing moments of transactions.

According to National Commercial Bank (NCB) market review, the cumulative market turnover since the beginning of this year to June 28 has reached SR3.13 trillion and accounted for nearly 75.8 percent of the total SR4.14 trillion achieved for the whole of 2005. For the whole of 2006, the overall market turnover is expected to surpass SR6 trillion, which will continue to strengthen the profitability of the Saudi banking industry.

The market is now operating at a quite fair value, but the Tadawul index should face strong resistance at around 14,700 level, where profit-taking will likely emerge. However, the economic and financial fundamentals are still supportive for the market.

Meanwhile, the Saudi Capital Market Authority (CMA) has approved initial public offering (IPO) of SR2.55 billion of Emaar Economic City (EEC), a consortium headed by Dubai-based Emaar Properties and a number of investors from Saudi Arabia.

The company also announced that it had received approval from the Ministry of Commerce & Industry for its incorporation.

The share capital of EEC is SR8.5 billion consisting of 850 million shares with a nominal value of SR10 each. EEC will be offering 30 percent of this equity - 255 million shares - through the IPO at a nominal face value of SR10 each thereby raising a total of SR2.55 billion. The IPO will open for subscription for 10 days from July 22 to Aug. 2. The share allotment has been decided at a minimum of 50 shares of SR10 each and a maximum of 25,000 shares of SR10 each.

The IPO will facilitate financing of the King Abdullah Economic City (KAEC), to be built at a pristine location off the Red Sea in the north of Jeddah with an investment of SR100 billion ($26.6 billion).

Saudi Arabian General Investment Authority (SAGIA) is the prime facilitator for KAEC. SAGIA's Investor Service Center will facilitate the provision of services to potential investors. The center is SAGIA's "one-stop" solution aimed at minimizing the number of formal steps associated with investment in the Kingdom.

"We are delighted to have received approval from the CMA for this floatation," said Mohamed Ali Alabbar, EEC chairman. "Our thanks go to CMA for all their support. EEC will signal the dawn of a new era of economic prosperity for the citizens of the Kingdom and the IPO is the best way for us to ensure that investors take part in this exciting project.

"In the past decade, Emaar Properties has built experience and knowledge on how to transform the power of ideas into reality. The company is now honored to be part of this mega project that will create value added opportunities for the people of Saudi Arabia," Alabbar added.