09/09/2015
12 factors attributed to stocks losing 989 point in two days
Nymex price settled at $ 37 a barrel, and Brent price settled at nearly $ 42 a barrel, which caused a drop in oil prices. That along with the weak data of the Chinese economy caused a hit to global stock markets is what made some people called yesterday “another black Monday” in the global stock market. In the Gulf, the Saudi market lost 438.7 points and the index closed at 7024.60 points, with trading 7.8 billion riyals. as for the rest of the GCC markets, Dubai market indexes fell to 3401.6 points, Abu Dhabi to 4264.8, Kuwait to 5815.6, Qatar to 10572.5, Muscat to 5736, Bahrain to 1304, and Egypt to 6667.8 points. The exchange revealed that the shares of eight companies had risen, while the shares of 158 companies has declined. A number of them had closed at the lower maximum rate. In addition, the number of shares traded yesterday was more than 386 million shares were distributed on more than 161 thousand transactions.
The shares of Alinma Bank, SABIC, Dar Al Arkan, Maaden, Al Rajhi Bank, and Emaar were of the most active in terms of value. While the shares of Dar Al Arkan, Alinma Bank, Emaar, Maaden, Kayan petrochemicals and Zain Saudi Arabia preceded the list of the most active stocks in terms of volume.
All the 15 market sectors has closed on sharp decline. The insurance sector was on top of the list; it declined by 7.99 percent, followed by the real estate development sector by 7.82 percent, petrochemicals by 7.26 percent, industrial investment by 7.19 percent, Media by 7.18 percent, agriculture by 6.57 percent, retail by 6.44 in percent, construction by 5.60 percent and the banking sector by 5.47 percent. The transport sector also declined by 4.36 percent, the energy sector by 4.18 percent, as well as the cement sector that declined by 3.94 percent. The telecommunication sector declined by 2.53 percent, while the Multi-Investment sector was the least declining sector by 1.32 percent.
The Global stock market
as for the euro, the European index FTSEurofirst 300 European has lost about $ 1.26 trillion of its market value since early August, after it begun declining to record the largest monthly loss since the 2008 global crisis. The Japanese stock market has received a strong hit when the Nikkie index lost 4.6 percent to close at 18540.68 points, which is its biggest recorded daily loss in two years. The TOPIX index has fell by 5.9 percent to close at 1480.87 points, and the JPX-Nikkei Index 400 declined by 5.7 percent to reach 13370.33 point.
Reasons behind the index drop
four global factors and eight local ones has caused the Saudi stock market index to reach its lowest level in years. At the global level, the market was affected by the factors that has affected the oil prices drop, the slowdown in the Chinese economy, which is accompanied by a reduction in the value of the yuan. It was also affected by the anticipation of the possibility of higher interest rates on the US dollar during the month of September, and the turmoil of the global financial markets.As for the local factors, at the forefront is failing to achieve a balance when a significant decline occurs, as it happened in the past two days. This is due to the absence of real market makers, and the lack of quick and urgent official statements that negate the rumor. Moreover, the failure to enact laws to regulate the size of the maximum facilities provided by banks to speculators, leading to an unfair liquefaction for portfolios, that impacts the market negatively. In addition, there is a dire need to increase the control on banks. They provide huge loans of more than 50% of the portfolio’s value, which is seen by observers as a great risk. It is considered a risk because the loss of what is known as the «Margin» leads to liquidating the portfolio by the Bank to protect his rights. Thus, it was suggested that a financing rate should be established to prevent the liquidation of portfolios, with the need for increasing the control over investment companies.
Breaking the bottom
In terms of technical analysis, Mohammed Shamimri, a financial adviser explained that the Saudi stock market index continued to decline as it was influenced by the current global events. He said that the index has broken the 2014 bottom, which is located at 7225 Point area, if trading remains below this level then August closed on the same situation, it means that the market trend change on the monthly frame downward, supported by the rest of the FPS. He added: the market has recorded a lower price at 6920 points, while the support area was at 6,900 points, but when the index was over 6939 points, which is historically the peak of May 2010, it quickly rebounded to close at 7024 points.
As for what might happen today if the pressure on the index remained as it is, he said: The strongest support for the index will be in case of breaking the support area of 6900 points, will be at the level of 6,500 points at the moment. So I say that everything is on the market it is possible at this point but a stabilization point has to be reached before finding price targets.
He pointed out that there are leading companies where the trading value has reached an area close to the IPO. Moreover, pointed out that several companies are currently trading under the IPO value, and below the book value. He said, this indicates that the sell-off process has been carrying unjustified fear.
On the reason the index dropped while the value of trades was rising, he said it is noted that the value of trades was high compared to the past few days. It reached 7.8 billion riyals, is thought to be caused by the liquidation of banks, which usually is denied, and may be justified if they mean what is known as (margin call).
And the reasons behind this, is what has been circling about traders receiving calls from banks offering them financial facilities in order to avoid the liquefaction of «margin call». This is what may be effecting traders’ decisions and causing this large liquidity. In return, we find that people are buying, since stocks that are offered at minimum percentages are very few, thus, investors are taking advantage of that by buying. Such good opportunities are not that frequent.
