World Economy

Sliding Saudi Stocks Add to Budget Pessimism

The Tadawul Stock ExchangeThe Tadawul Stock Exchange

Saudi Arabian stocks lost the most in the world for a second straight day amid waning hopes for an oil production deal that may buoy up the nation’s finances.

The Tadawul All Share Index was the worst performer among more than 90 gauges tracked by Bloomberg, falling 4.5% in Riyadh to the lowest level in more than eight months.

Al Rajhi Bank and Saudi Basic Industries Corp., which together account for about 20% of the measure, were the biggest contributors to the drop. The kingdom’s equities are trading at their cheapest level relative to emerging-market peers since March 2009.

The selloff began on Monday after Saudi Arabia announced it will curb state employees’ allowances and cancel bonus payments. While the measures may help the country narrow a budget shortfall that ballooned to the widest since 1991 last year, the cuts are likely to hurt consumer spending because the government is the nation’s biggest employer of Saudis.

The kingdom is grappling with a halving of oil prices in the past two years, and major producers are meeting in Algeria this week to discuss stabilizing the market.

“Adding to the news from the Saudi government this week is all the pessimism regarding a potential agreement in Algiers,” said Saleem Khokhar, the Abu Dhabi-based head of fund management and equities at the asset-management group of National Bank of Abu Dhabi PJSC. “It’s a bad combination. Many stocks are trading at very attractive levels right now, but investors are still concerned about the impact” of the government measures, he said.

The Tadawul, the worst performer in the Middle East and North Africa this year, is headed for its worst month since January, when the price of Brent crude tumbled to the lowest level in more than 12 years. The gauge has dropped 10% in September, the most among major global indexes.

The index traded at about 11 times its members’ estimated future earnings, the lowest level in more than seven months, compared with 12.5 times for the MSCI Emerging Markets Index.

Al Rajhi Bank retreated 5.7%, poised for the steepest loss since August 2015, and Saudi Basic Industries Corp. fell 5.3% to the lowest level since April.