Saudi Arabia’s stock market fell sharply for a second straight day on Wednesday, leading the entire region down, in response to weak oil prices and austerity measures.

Saudi Arabia’s Tadawul All-Share Index (TASI), which had retreated 3.8 percent on Tuesday, sank a further 3.4 percent to 5,534 points, its lowest finish since Jan. 21. 
TASI has tumbled 19.5 percent from a peak in April.
John Sfakianakis, director of economics research at the Gulf Research Center, told Arab News: The latest selloff underlines concern over how the Kingdom is coping with oil prices below $50 a barrel. 
Waning hopes for a deal at OPEC talks in Algiers this week worsened the rout.” 
He added: “Many stocks are trading at very attractive levels right now but investors would continue to look for directional signs.”
James Reeve, deputy chief economist and assistant general manager, Samba Financial Group, told Arab News: “This probably reflects general unease about oil prices and the apparent failure of OPEC to reach a production cut deal.” 
Reeve also said: “More specifically, the fall in retail stocks probably reflects the announcement of the cut to public sector allowances. These can often double an individual’s salary and a 20 percent cut will eat into disposable income.”
He added: “The fall of construction stocks is probably related to this in so far as the cuts to allowances suggest that the government will keep its fiscal stance very tight for the rest of the year at least, meaning that no large building projects are likely to be commissioned and payment delays will continue.”
According to Reuters, trading volume climbed to a two-month high as the index fell below technical support on the February low of 5,551 points, though it closed off its intra-day low. It has stronger support at the January low of 5,349 points.
Brent oil futures had fallen about 3 percent to around $46 a barrel on Tuesday after Iran rejected an offer from Saudi Arabia to limit its oil output in exchange for Riyadh cutting supply.
This hit petrochemical stocks, with Saudi Basic Industries Corp. (SABIC) sliding 4.0 percent on Wednesday. PetroRabigh outperformed the sector, dropping only 2.1 percent, after saying it would proceed eventually with a rights issue that has been delayed since 2015.
The Saudi insurance sector also suffered after the government said this week that it would reduce bonuses and perks for public sector workers; insurance stocks are favored by local retail investors, who will have less disposable income because of the austerity drive, Reuters added.
“In Saudi Arabia it is very common to see an average public sector employee trading in the stock market, because someone from his family once made a fat profit — but those days are long gone now. They simply won’t have the financial flexibility with these austerity moves,“a Jeddah-based broker told Reuters.
Among other stocks directly exposed to consumer sentiment, travel agent Al-Tayyar plunged 8.2 percent.
Some telecommunications firms and utilities, seen as defensive shares, performed relatively well and Zain Saudi was one of only four rising stocks, gaining 3.1 percent.

Source: Arab News