The Saudi stock market dropped 2.2 percent Sunday as a Jeddah-based economist stressed that the Tadawul needs more policy support at this juncture.

“Rumors and high frequency policy changes have had their toll on sentiment,” Tamer EI Zayat,a senior economist at the National Commercial Bank, told Arab News.
Banking shares dragged the Tadawul All-Share Index lower by 124.48 points to 5,506.78 as the banking index tumbled 4.5 percent.
The value of traded shares reached SR2.74 billion with a volume of 187.4 million.
“In my opinion, the issue with the Saudi stock market is structural rather than event based, with the market close to registering a third year of annual declines,” said EI Zayat,
“My worry as an economist right now is the negative ‘wealth effect’ and its impact on private consumption,” he added.
EI Zayat said: “The market since August 2014 had lost more than $250 billion in market capitalization, which will most likely curtail spending.”
He said: “The stock market in addition to foreign direct investment are important venues of attracting capital inflows, and it requires policy support at this juncture. Ostensibly, one of the ways, US policy makers reinvigorated their economy was through reflating the balance sheets of banks and individuals in order to jumpstart private consumption, and in turn economic growth.”
On Sunday, Telecommunications firm Zain Saudi fell 5.4 percent, continuing a pull-back after surging early last week on hopes it would benefit from deregulation of the sector.
But retailer Jarir Marketing climbed 1.8 percent after it reported a net profit of SR220 million ($58.7 million) for the three months to Sept. 30, up from SR218.5 million a year earlier. Analysts polled by Reuters had predicted SR200.6 million.
Dairy firm Almarai gained 1.4 percent after posting a 10 percent rise in quarterly profit to SR654.6 million. Analysts had forecast SR627.8 million, Reuters said.
On Sunday, Banque Saudi Fransi plunged by its 10 percent daily limit in very thin trade.
According to Reuters, banks have been hit in recent weeks by concern that the slumping construction sector could saddle them with bad debt, and by the central bank’s decision to have them reschedule consumer loans to customers whose incomes have been hit by the government’s cuts to public sector allowances.
On Sunday, the Okaz newspaper reported, citing unnamed sources, that Saudi Arabian Monetary Agency (SAMA) had told banks to postpone for a month receiving payments on such loans as part of the rescheduling process — a fresh sign that banks are being required to bear much of the burden of Saudi Arabia’s austerity drive as oil prices sag, Reuters added.
SAMA officials were not available to comment.
Commenting on market developments, Faisal Alsayrafi, a Jeddah-based financial adviser, told Arab News that cost cutting measures by government affected the sentiment of investors.
He also said geopolitical situation in the region was weighing on the stock market.

Source: Arab News