Saudi Stocks Shed 5.46% over U.S., Europe Woes

Shares shed 5.46 percent on Saturday in the first day of trading in oil-rich Saudi Arabia after the Muslim weekend, as investors reacted to the historic U.S. credit downgrading and European debt woes.

The Tadawul All-Shares Index closed 5.46 percent down, at 6,073.44 points as all shares tumbled a day after Standard & Poor's cut the U.S. credit rating for the first time in history over its massive fiscal deficit and debt load.

"The S&P rating and (debt) problems in Europe... have scared investors," said financial analyst Abdulwahab Abu Dahesh, pointing out, however, that the "down trend had started a while ago."

Leading banking shares dropped by 4.7 percent while shares of the petrochemical sector shed 6.7 percent. Construction shares were also 6.4 percent lower.

Al-Rajhi bank was down 5.2 percent in afternoon trading, while SAMBA bank dropped 6.98 percent. Petrochemicals giant SABIC saw its shares drop 5.54 percent.

In the telecommunications sector, STC shares dropped 2.56 percent, while Zain KSA plummeted 6.15 percent. Etihad Etisalat also fell 5.9 percent.

"Saudi shares have reacted to two events: sharp drops on Thursday in markets, especially oil, and the S&P cut of the U.S. rating," economist Mohammed al-Omran told al-Arabiya news channel.

He noted that the Saudi market was the first to react globally to the late Friday S&P statement on the U.S. economy, with the start of the trading week in Saudi Arabia, while all other markets remained shut for the weekend.

"The Saudi economy relies on exports, mainly petrochemicals, so it is normal that it would be strongly affected," he added.

Global oil prices fell sharply but then recovered on Friday as economic worries in Europe and the United States cast more clouds over the market.

Abu Dahesh expected "further drops in the Saudi market, depending on the (movement of) international markets."

Saudi Arabia sits on one-fifth of world oil reserves and is the largest exporter of crude oil.