MIDEAST STOCKS-Saudi Arabia posts biggest daily drop in Six years

DUBAI (Reuters) – Saudi Arabia’s stock index posted its biggest daily loss in six years on Tuesday after the price of Brent crude oil dropped below $59 per barrel for the first time since 2009.

The Saudi index tumbled 7.3 percent to 7,330 points, its lowest level since June 2013. Dozens of stocks fell by their daily 10 percent limits, indicating further potential weakness. The index has dropped 34 percent from its September peak.

Investors are concerned that dwindling oil revenues could prompt the government of the world’s largest oil exporter to reduce spending, which could in turn slow growth in the wider economy and hurt corporate profits.

Many analysts think Saudi Arabia’s huge fiscal reserves will allow it to avoid any major spending cutback, but the uncertainty is still weighing heavily on the market.

“We are waiting, especially in Saudi Arabia, for the government budget for 2015 to see whether the government would maintain its current expenditure levels or if they would cut down significantly,” said Abdullah Alawi, assistant general manager and head of research at Aljazira Capital in Riyadh.

“We need a big event like that, otherwise we will remain volatile and negative.”

Saudi Arabia is expected to announce its 2015 budget by the end of this month, and possibly as soon as on Monday.