Saudi Arabia’s stock index slumped 3.8 percent on Tuesday after the government said it would cut ministers’ salaries by 20 percent and scale back financial bonuses and perks for public sector workers under an austerity drive.
The new steps largely appear to formalize spending reductions introduced on an ad hoc basis since last year, and they will not by themselves make a huge difference to the government’s deficit. NCB Capital estimated allowances accounted for about a quarter of the government’s total salary expenses last year, which were 38 percent of its overall budget.
Nevertheless, the announcement underlined the bleak outlook for Saudi government spending, which is a key driver of consumption, as oil prices stay low.
None of the 170 traded Saudi shares rose on Tuesday with roughly 30 percent of them dropping their 10 percent daily limits as trading volume jumped above the three-month average. The index posted its biggest daily percentage drop since January.
The retail and insurance sectors were hard hit. Luxury goods retailer Fitaihi slumped 10.0 percent and supermarket operator Al-Othaim Markets dropped 4.7 percent.
The insurance sub-index retreated 5.9 percent; the sector is chiefly traded by local retail investors.
“Disposable income has been hit — traders can no longer afford to participate in the stock market because they now have to divert this money toward paying bills,” said a Jeddah-based broker.
“Moving forward I think there will be far more prudence when it comes to trading the speculative stocks. For the value traders, this may be a good time to hunt for value.”
Banking shares, which had rallied on Monday, erased some of those gains with National Commercial Bank, a lender with close ties to the public sector, down 3.5 percent and Aljazira Bank, which does considerable business with stock market participants, shedding 5.4 percent.
Dubai’s main index pulled back 0.8 percent with 24 stocks declining and eight advancing. Builder Drake & Scull , which has substantial exposure to Saudi business, dropped 1.8 percent and Dubai Parks and Resorts retreated 1.3 percent.
Blue chips weighed on Abu Dhabi’s index, which fell 0.5 percent. Dana Gas lost 3.6 percent and First Gulf Bank declined 1.3 percent.
Source: Arab News
GMT 15:42 2016 Friday ,30 September
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All rights reserved to Arab Today Media Group 2021 ©
Maintained and developed by Arabs Today Group SAL.
All rights reserved to Arab Today Media Group 2021 ©
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