OPEC deal fails to cheer Saudi stocks

Dubai - Saudi Arabian stocks swung between gains and losses as investors weighed the prospect of the kingdom being sued for its alleged involvement in the September 11 attacks against OPEC’s first deal to cut oil production in eight years.

The Tadawul All Share Index, which rose and fell at least 0.8% in the first 30 minutes of trading, lost 0.5% at 10:30 in Riyadh. Jarir Marketing Company’s 3.5% drop was the biggest contributor to the decline. About two-third of the gauge’s 174 members retreated.

Brent crude surged the most in almost six months after members of the Organisation of Petroleum Exporting Countries (OPEC) in Algiers agreed late on Wednesday to cut production, the first such accord in eight years.

Saudi Arabia’s decision to join was necessitated by its tattered finances, which prompted the government to announce a reduction to state employees’ wages and bonuses on Monday, triggering a stock rout.

The US Senate vote to override President Barack Obama’s veto of a bill allows the kingdom to be sued for its alleged links to the September 11 attacks, which may delay the kingdom’s plan to sell its first international bonds.

"There’s so much to consider today," Tariq Qaqish, the Dubai-based head of asset management at Al Mal Capital PSC, which has been snapping up bargains because valuations have fallen too low, said before the market opened.

"The deal to cut oil production is positive, but you also have to consider the impact of the 9/11 case. We expect government-related funds to intervene to help calm the market down."

Bollinger

The kingdom, which relies on income from crude to fund expenditure, is grappling with a budget shortfall that ballooned to the widest since 1991 last year after oil prices declined.

Saudi Arabia can take the financial hit if it’s sued, "but if the amount is big, then it might lead to negative publicity and scare some investors," Qaqish said.

"If the bond sale is delayed, then that is going to hurt those corporates that have been waiting for payments by the government. More delays in the bond offering means that some companies will have difficulty meeting their obligations."

Technical indicators had predicted a rebound. The measure’s 14-day relative strength index slumped to 23, well past the level that signals it is oversold.

The gauge also fell below its lower Bollinger band, suggesting it was due an increase.