Saudi Arabia's bourse dived by nearly $18 billion (Dh6bn), while most other Gulf exchanges recorded relative stability as regional markets entered the first week of another calm summer month, official figures showed yesterday.
While speculation and market fundamentals dominated most markets in the Gulf Co-operation Council (GCC), the Saudi Tadawul bourse in Riyadh was gripped by a recent decision by market regulators that the names of investors holding stakes of at least five per cent in any of the 125 listed companies would be published on daily basis.
The decision, which would be enforced in mid August, and is intended to bring Tadawul in line with Western standards of market transparency, provoked an exodus of capital as Saudi Arabian investors feared their holdings would become public knowledge.
From around $454.37bn at the end of July, Tadawul's market capitalisation fell to nearly $436.86bn on Thursday, a decline of around $17.5bn, according to figures published yesterday by the Abu Dhabi-based Arab Monetary Fund (AMF).
In contrast, most other GCC markets either recorded slight declines or small growth following sharp fluctuations during June and August. The UAE lost around $3bn, including $2bn in Abu Dhabi, while the exchanges of Kuwait and Qatar gained nearly $200 million each.
Oman's Muscat Securities market lost around $1.3bn, while Bahrain shed $700m.
The decision to list major investors in the Saudi market, the latest of a series of moves aimed at upgrading the bourse, depressed the Tadawul index by a staggering 102 points in one day on August 2 and it continued its plunge for the eighth consecutive day by August 4.
As recently as the end of May, the exchange was trading around the 9,500 mark – up 20 per cent year to date.
The Saudi market began its dive in July this year as that decision was announced early in the month.
Official Saudi data showed the volume of shares traded tumbled from around $6.42bn in June to only $4bn in July – a drop of almost 40 per cent. The total number of transactions also plunged by nearly 20 per cent.
"While the drop is consistent with global equity market trends, it is nonetheless a blow for the Saudi market. Until July, it was the second strongest performing market in the world this year – after Bovespa. By contrast, it is now the worst performing exchange in the region," the Oxford Business Group said.
According to its study, the relatively closed nature of the Saudi market, combined with a lack of visibility, has in the past encouraged speculative action, with trades often following rumour rather than clear market signals. It said: "The attempt to list large shareholders forms part of the regulator's move towards shedding this somewhat opaque reputation.
"Whether the move will be successful in achieving this goal is uncertain. A loophole has been identified that will provide investors with a means of escaping scrutiny."