Saudi stock index fell to the lowest level since Jan 2016

The main index of the Saudi stock exchange (TASI, Tadawul Al Share Index) showed the worst result among 90 tracked by Bloomberg stock market indices, dropping in the course of trading on Wednesday, more than 4.5%.

Over the past two days TASI fell by 8.64%, dropping to the low to 5440,7 points, the lowest level since January 21, 2016.

The largest drop on Wednesday showed quotes banking and investment group Al Rajhi (-6,69%) and Saudi Basic Industries Corporation (-6,48%), which, according to Bloomberg, jointly accounting for about 20% of the capitalization of the Saudi stock market.

Analysts attribute the drop in prices because investors believe less and less in the achievement of any agreement on the limitation of oil production in the International energy forum in Algeria. On Tuesday the fall in oil prices (about 4%) triggered a message stating that the Saudi authorities intend to reduce the salaries of civil servants and to cancel the payment of premiums.

“News from the government have imposed this week on General pessimism about a possible agreement in Algeria. It’s a bad combination. A stock is now trading at a very attractive level, but investors are concerned about the effects of government actions”, — said Bloomberg’s head of Fund management National Bank of Abu Dhabi Saleem Khokhar.

Earlier, OPEC announced that in 2015 the current account balance (balance of all transactions of residents with nonresidents) of the countries of cartel for the first time since 1998, were negative. The revenues of Saudi Arabia from crude oil sales fell from $284,4 billion in 2014 to $157,9 billion.

In the spring of 2016 Advisor to the Deputy crown Prince of Saudi Arabia Mohammed bin Salman, who oversees economic policy, said that in the first half of 2015 because of falling oil prices the reserves of the Kingdom on a monthly basis was reduced by $30 billion, and if spending remains at this level, the country is “totally bankrupt” in just two years.

To avoid bankruptcy of the Kingdom, Prince Mohammed has reduced expenditure budget by 25%, restored strict control over budget expenditures, adopted a decision on external borrowing and began preparing for the introduction of VAT and other taxes and duties.