8 companies in TASI record historical low prices: Market monitoring and analysis

A recent report published by the Okaz newspaper revealed significant developments in the Saudi stock market, with eight companies listed on the Tadawul All Share Index (TASI) recording their lowest price levels since their initial public offerings. This comes at a time when the market is experiencing uneven performance across different sectors, prompting questions from investors and analysts about the underlying causes of this decline and its potential future impact.

The context of the Saudi financial market and the challenges of volatility

The Saudi Stock Exchange (Tadawul) is the largest stock market in the Middle East and North Africa region and plays a pivotal role in achieving the goals of Saudi Vision 2030, which aims to diversify income sources and attract foreign investment. Despite the strength and resilience of the Saudi economy, stock markets are inherently influenced by a range of volatile factors. Historically, Tadawul has experienced multiple economic cycles affected by global oil prices, geopolitical tensions in the region, and global monetary policy decisions, particularly interest rates set by the US Federal Reserve, to which the local currency is pegged.

Factors affecting the decline of company stocks

Companies hitting historically low levels rarely occur in isolation from surrounding economic conditions. This decline in some stocks can be attributed to several fundamental and technical factors, including:

• High interest rates: The persistence of high interest rates for extended periods has increased the cost of financing for companies, putting pressure on profit margins and reducing the attractiveness of stocks compared to fixed-income instruments.
• Sector performance: Certain specific sectors (such as petrochemicals or cement at certain times) may suffer from a decline in global or local demand, which is directly reflected in the financial statements of companies listed within these sectors.
• Portfolio restructuring: Large investors and investment funds sometimes resort to liquidating their positions in certain companies to move towards other promising investment opportunities or emerging sectors supported by major government projects.

Economic importance and impact of the event

The fact that the share prices of 8 companies have reached a historic low carries important implications for investors:

On the local level: This decline is a double-edged sword; on the one hand, it may raise concerns among current shareholders about further losses, and on the other hand, value investors see it as a golden opportunity to seize shares of financially sound companies at reduced prices, betting on their future recovery.

Regionally and internationally, the Saudi market remains a focus for global funds, especially after its inclusion in emerging market indices (MSCI and FTSE). The price corrections experienced by some companies provide foreign asset managers with indicators of the realism of current valuations and the market's attractiveness for new capital inflows.

In conclusion, the bet in the Saudi financial market remains on the Kingdom’s sustainable economic growth and the ability of companies to adapt to economic changes, as analysts expect the coming period to witness careful sorting of companies based on their operational performance, growth capacity and profit distribution, away from price speculation.