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Saudi Arabia's Stock Market Just Logged Its Worst Month Since Lehman
If someone asked you what the worst performing stock market in the world was in August, you might well be tempted to say the SHCOMP or the ASE, considering the fanfare around China’s equity turmoil and the fact that Greek stocks plunged after coming off a five-week halt.
But what you might be surprised to learn is that in fact, Saudi stocks fared worse than Chinese equities for the month and one more Sunday like 8/23 could well have brought the total slide to more than 20%, just a shade better than Greek shares.
Of course the comparison is distorted by the fact that the ASE was halted until August 3 and also by the fact that were it not for the efforts of China’s plunge protection "national team" there’s no telling where the SHCOMP might be today, but nevertheless, it serves to underscore how nervous investors are getting about what is an increasingly perilous financial situation in the kingdom.
As detailed here on a number of occasions of late, the country is staring down a current account/ fiscal account deficit outcome that makes Brazil look favorable by comparison, and although FX reserve draw down slowed in July, it came at the cost of reentering the bond market - i.e. raising debt to offset the petrodollar burn.
"A cloudy fiscal policy along with unattractive economic data and oil prices continuing to decline fueled negative sentiment about the market which exaggerated fears among investors," Mohammed Al-Suwayed, Riyadh-based head of capital and money markets at Adeem Capital told Bloomberg. "There hasn’t been any official statement from King Salman on his fiscal policy or its direction, but all indications point toward a possible contractionary fiscal policy."
"Indications" like the fact that Saudi Arabia is conferring with advisers on how to rein in spending without triggering social unrest.
Meanwhile, intervention in Yemen - which recently escalated meaningfully - doesn’t come cheap and indeed, Saudi airstrikes on supposed Houthi targets have at times served to do reputational damage, something which also does nothing to shore up investor confidence. Case in point, from Reuters on Sunday:
An air strike by warplanes from a Saudi-led coalition, which said it targeted a bomb-making factory, killed 36 civilians working at a bottling plant in the northern Yemeni province of Hajjah on Sunday, residents said.
In another air raid on the capital Sanaa, residents said four civilians were killed when a bomb hit their house near a military base in the south of the city.
The attacks were the latest in an air campaign launched in March by an alliance made up mainly of Gulf Arab states in support of the exiled government in its fight against Houthi forces allied to Iran.
"The process of recovering the bodies is finished now. The corpses of 36 workers, many of them burnt or in pieces, were pulled out after an air strike hit the plant this morning," resident Issa Ahmed told Reuters by phone from the site in Hajjah.
The Saudi response: "We got very accurate information about this position and attacked it. It is not a bottling factory."
Ultimately, one gets the idea that the Saudis have yet to fully accept the gravity of the situation. They're running a budget deficit that amounts to 20% of GDP and it certainly looks as though the only saving grace - in the absence of a sustained rally in crude which the Saudis are apparently determined to single-handedly prevent - is the fact that debt-to-GDP is negligible, meaning there's plenty of room to tap the bond market for cash and relieve the pressure on the SAMA stash.
Even so, this situation, like that facing a host of other commodity-dependent emerging markets, is getting quite precarious, and for the Saudis it's complicated by participation in two regional proxy wars and the absolute necessity of maintaining social order.
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with historic declines taking place across the global stock indices, what can we expect for precious metals?
Based on your prices, high premiums.
Fuck that shit.
I'll buy Silvertowne bars for $16.50/oz.
OP's (l1b3rty) article shows a fundamental misunderstanding of financial markets and economics.
"Gold is down approximately 0.6% on the day, with silver down 50 cents to $14.75. That gold is down is counter-intuitive considering its appeal as a safehaven, while silver generally takes a major dump amid such tall economic volatility."
That gold is down is counter-intuitive, and for a single day? There are so many factors that go into whether a price goes up or down. Moreover, should we expect that gold would be a safe haven like in 2008, when the stock market AND gold were both making huge declines? Yes, gold probably had some 'safe haven' seekers in 2007 and early 2008 when things started to go south, but once deflation kicked into high gear, it was liquidation time for nearly every asset class. Gold is a safe haven from government devaluations and when currencies go worthless, but if deflation were in queue, it would likely result in the dollar going up and gold going down as people liquidated it in an effort to get dollars. This is pretty basic Austrian economics stuff here. von Mises was pretty clear that there was no way to avoid the deflationary effects of credit bubbles like we had had here. There is basically nothing the Fed could reasonably do to prevent that. I'm not talking about situations where the government decided to devalue it's currency by 50% overnight or something, but that is not what von Mises was talking about.
The House of Saud ain't gonna make it through this one. Hey, look, you had a good run. You did a great job of committing all the same acts that "evil" regimes do while still being on the "good guy" list for decades longer than anyone thought you could. But that's over now.
pumping all they can till isis takes over, on a side note ever watch tyrant?
I don't watch much TV these days. Sorry.
"Saudi Arabia's Stock Market Just Logged Its Worst Month Since Lehman."
good...fuck the Saudi's...fuckers.
Much as I detest the Saudis and their spreading their Wahhabist poison around the globe and I can almost guaran-fucking-tee what comes in their place will be even worse.
But yeah, their days are clearly numbered.
" since Lehman"...thx for the daily dose.
Isen't ...'since Lehman' supposed to have a trademark thingy after it?
If any country needs a grassroots revolution, it is Saudi Arabia.
First they need to import some grass.
"Worse month since Lehman". HAHAHAHAHAHAHA That's fucking funny as shit!!!! LOL
Race to the bottom
Those dollar addicts sold their gold.
It serves them well.
Not a problem here as the PPT is panic buying everything the last 1/2 hour of the day, right on schedule. Fucking assholes.
"A cloudy fiscal policy"...damn ...I am tired of everyone blaming their problems on the weather..
I don't own Saudi Arabian stocks. Fuck em.
OT, but relevant I think: Canadians -- myself included-- just learned several days ago that the Harper government signed a backroom deal in 2009 with Saudi Arabia to the tune of $15 biilion for the sale of LAVs (light-armoured vehicles.) This secret deal took place without even going through due parliamentary process: there was no debate in the House of Commons, nor any Senate discussions.
This deal that was rammed through behind our collective backs was also secretly approved by Harper's friend Ben Netnyahu. As I write this, this story only thus far has made it briefly on the Globe and Mail's website for a few hours before being pulled back; meanwhile, none of the Canadian lame stream media have picked up this story... absolutely not a single goddamn media outlet!
Just thought ZH'ers might be interested in this interesting story.
So now, here we are, learning that Saudi's stocks are going to shit. Thank you, this just made my day.
Fuck you, Stephen Harper, and fuck the filthy tar sand barrel you rode on, you fucking prick!
"Since Lehman"!
nep nep nep nep nep nep nep nep nep