Saudi stocks drop most after kingdom cuts pay, bonuses

Bloomberg

Saudi Arabian stocks fell more than any other market in the world as the kingdom announced fresh measures to narrow the budget gap.
Not a single stock rose on the Tadawul All Share Index, which retreated 3.8 percent on Tuesday, the most since for a single session since January. The hotel and media indexes were the biggest decliners on a percentage basis, while Al Rajhi Bank was the largest contributor to the main gauge’s loss.
The following are some of the key highlights of the Saudi market on Tuesday:
The Tadawul All Share Hotel & Tourism Industries Index and the Tadawul All Share Media & Publishing Industries Index tumbled 9.6 percent and 7.5 percent, respectively All but six of the Tadawul’s 174 members fell Saudi stocks led a decline in Bloomberg’s GCC 200 Index, which dropped 1.6 percent The Tadawul’s 14-day relative strength index fell below 30 for the first time in a month
The world’s biggest oil exporter curbed state employees’ allowances and canceled bonus payments, the official Saudi Press Agency reported on Monday. It also reduced ministers’ salaries by 20 percent and that of members of the Shura Council, which advises the monarchy, by 15 percent. “Government pay was sacred during the previous decades,” said Mohammed Alsuwayed, the Riyadh-based head of capital and money markets at Adeem Capital. “This move shows how serious the government is” about implementing its austerity plan, he said.
The measures are part of the nation’s plan to tame a budget deficit that swelled to about 15 percent of gross domestic product last year, the widest since 1991, according to central bank data compiled by Bloomberg. The kingdom, which is diversifying its economy away from oil, allowed foreigners direct access to its stock market for the first time in 2015, and relaxed the rules further this month in a bid to lure investors. Still, the index is headed for its third-straight monthly loss and is the worst performer across the Middle East and North Africa this year.

Worst Performer
The Tadawul has lost 17 percent in 2016, compared with a 6 percent retreat for the GCC 200 Index, a measure of the largest and most liquid companies in the six-nation Gulf Cooperation Council. The Saudi measure’s drop on Tuesday is the biggest among more than 90 of the world’s most liquid gauges tracked by Bloomberg. Its 14-day relative strength index slipped below 30 for the first time in a month, a sign to some analysts that a measure has fallen too fast and may be poised to rebound.