Saudi stocks head for first Gulf bear market this year

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Saudi stocks are set to become the first in the Gulf region to enter a bear market as a fall in oil prices undermines sentiment after nearly two years of outperformance.

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The Tadawul All Share Index fell 1.3% at 2 p.m. in Riyadh and is now down 20% from its peak in May. A close at the current level would confirm a technical bear market.

Saudi shares join their peers in the United States and Europe to reach the unwanted milestone as investors worry that the global economy is heading for a slowdown, hampering demand for oil, the kingdom’s main export. Until May, the country’s stocks were seen as a safe haven in emerging markets, boosted by high energy prices and government initiatives to diversify the economy.

According to Hasnain Malik, strategist at Tellimer in Dubai, growth concerns and some degree of global portfolio contagion for wealthy local investors are hurting performance. « For a while, along with the rest of the world, the Tadawul might take inspiration from the US Fed more than anything more local, » he said.

With a 2% decline this year, the Tadawul still outperforms MSCI Inc.’s Emerging Markets benchmark, which is down 28%. Saudi equities are trading at a 36% premium to their counterparts in developing countries, above the 23% average for the past decade. At the same time, the Tadawul’s 14-day relative strength index slipped into oversold territory, usually an indicator of an impending rebound.