Finance costs impact TASI as 48 firms hit lows

The Saudi stock market experienced a clear decline, with the "TASI" index dropping approximately 0.6% to close at 10,682 points, after fluctuating between an intraday low of 10,674 points. This decline occurred despite an improvement in the long-term yield on Saudi ten-year bonds, which fell to around 5.69%, a development that should have alleviated pressure on stock valuations. However, the rise in short-term financing costs—evidenced by the Saibor rate increasing by about 6 basis points to 5.05%— widened the gap between Saibor and its moving average, reflecting tightening liquidity conditions for short-term funding. This situation has heightened pressure on highly leveraged stocks, with companies holding high debt-to-equity ratios experiencing larger declines, while those with lower leverage maintained relatively better performance. The session indicates that the market is under dual pressure: rising short-term borrowing costs despite a decline in long-term yields, leading to continued price deterioration and significant weakness across 48 companies across various sectors, including major firms like Sabic and Sipkim Global. While the market is entering a valuation balance zone, financial pressures and liquidity strains remain, with potential continued downward pressure driven by high financing costs if the Saibor remains elevated. This could push the market towards a lower equilibrium level.

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