http://www.gulf-times.com/site/topics/article.asp?cu_no=2&item_no=124171&version=1&template_id=48&parent_id=28
Saudi shares fall as investors struggle to regain confidence Published: Sunday, 24 December, 2006, 08:38 AM Doha Time DUBAI: Saudi fashion retailer Fawaz Abdulaziz Alhokair & Co closed below its initial public offering price on its first day of trading yesterday, the second listing to do so in less than two months. Saudi shares fell for a third straight session as investors in the Arab world's largest bourse struggle to regain confidence following a stock market crash this year that erased 53% of the index's value. Alhokair shares finished their first session at 99.50 riyals ($26.53), 9.5% below the IPO price of 110 riyals. The company, which operates 617 stores across Saudi Arabia, the world's largest oil exporter, sold 12mn shares, or 30% of its stock, in October. The IPO's pricing and weak market sentiment contributed to the decline in Alhokair's share price, said Jamil Matar, regional manager for Emaar Financial Services. Saudi International Petrochemical Co (Sipchem) closed 17.7% below its IPO price on its debut in November, a first in Saudi market history. The $352mn Alhokair IPO was oversubscribed in spite of a public debate about the 100-riyal premium factored into the IPO price. "I don't know under what financial theories they valued Alhokair at 110 riyals. By my estimates it is not even worth 10 riyals," Matar said. Alhokair officials could not be immediately reached to comment. The price of shares sold in Saudi IPOs is not determined by a process of book-building. The offer is either made at nominal value of 10 riyals per share, or a premium set by the company. But sentiment in the Gulf Arab region, where IPO shares have risen 300% on their stock market debut in the last two years, also contributed to the performance, he added. Saudi stocks have hovered near two-year lows along with counterparts in Qatar, Dubai and Abu Dhabi as a crisis of confidence gripped regional investors this year. The Saudi index has erased more than a quarter of its value just since October 28, when the bourse's decision to end a popular evening trading session triggered a selloff. Nine of Saudi Arabia's 10 largest companies fell yesterday, led by Saudi Basic Industries Corp (Sabic), the world's largest petrochemical company by market value. Sabic fell 1.88% to 104.25 riyals, its lowest close in almost two weeks. The index ended at 7,797.84 points, down 0.86%. In Kuwait, the index finished higher for the first time in three sessions, rising 0.14% to 9,906.60 points. Commercial Bank of Kuwait, the top gainer among the 10 largest companies, rose 1.85% to 1.10 dinars ($3.81). It had fallen 3.61% in the prior two sessions. Kuwait's largest listed companies are trading, on average, at about 10 times forward earnings, which is encouraging buying, said Mustafa Behbehani, director of Kuwait Gulf Consulting Co But a bourse disclosure probe and the government's cancellation of private sector contracts in November are still weighing on investor sentiment, he added. "These two forces are pulling the market in different directions. That's why it is not moving in any clear direction right now," Behbehani said. The Kuwait Stock Exchange briefly halted trading in shares of Markets Complex Co pending clarification of newspaper report that the company is negotiating a property contract in Saudi Arabia. Markets Complex, which owns, manages and leases commercial properties, is in talks to develop a $150mn real estate project including hotels and shopping centres in the Saudi city of Medina, Al-Rai daily reported on Saturday, quoting sources. Trading resumed later after the clarified the report. 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