* Lowest close for index since March 2011
* Fear of more austerity measures
* U.S. Congress vote on lawsuits also hurts sentiment
* Reuters poll shows fund managers turned negative
* Q2 GDP data not bad but may be revised lower
By Andrew Torchia
DUBAI, Oct 2 Saudi Arabia's stock market plunged
to its lowest close since March 2011 on Sunday because of fears
the government could introduce more austerity measures to curb a
big budget deficit caused by low oil prices.
The Saudi index edged up in early trade but fell
steadily through the afternoon to close 3.1 percent lower at
5,448 points in thin trade.
Global stock markets ended last week on a firm note while
Brent oil for November delivery settled above $49 a
barrel in response to last week's deal by OPEC crude producers
to cut output.
But many analysts are uncertain whether the OPEC deal will
be implemented effectively or result in any extended rise of oil
And after the Saudi government said last week that it
was reducing allowances for public sector employees - a major
blow because many Saudis rely for up to 30 percent of their
income on such allowances - the main factor for the stock market
is the damage to economic growth from austerity steps.
"I expect more pressure in the market. With the approach of
quarterly results announcements, people are basing their
positions on what is to come, as more risks are expected in the
market towards the end of the year and through the first quarter
of 2017," said Abdulhamid al-Ameri, a prominent Saudi economist.
Some investors think additional austerity steps -- perhaps
new fees or taxes on the kingdom's large workforce of foreigners
-- could be approved as early as a weekly cabinet meeting on
A monthly Reuters poll, published on Thursday, found Middle
East fund managers had turned negative on balance towards Saudi
Arabian equities for the next three months because of the
Miner Ma'aden sank 4.6 percent on Sunday while
travel agent Al Tayyar, exposed to weakening private
consumption, dropped 6.8 percent.
Many blue-chip petrochemical and banking stocks
outperformed, with Saudi Basic Industries down only
0.6 percent. But National Petrochemical tumbled 9.8
percent after saying a subsidiary would halt operations for 60
days because of maintenance and that the financial impact was
not yet known.
"Today the worst-hit sectors are the ones related directly
to the local market and consumer spending - retail, electricity,
cement and even media, which hit limit-down," said Ameri.
Government data released on Friday showed Saudi Arabia's
gross domestic product, adjusted for inflation, rose 1.4 percent
from a year earlier in the second quarter of 2016, after growth
of 1.5 percent in the first quarter.
That was only a marginal slowdown and suggested the Saudi
economy was faring better than feared in the face of oil's
slump. But many analysts think the growth figures understate the
blow from low oil prices and may eventually be revised lower, as
Saudi GDP data has been in the past.
Last week's vote by the U.S. Congress voted to allow
relatives of victims of the Sept. 11 attacks to sue Saudi Arabia
has also hurt market sentiment in Riyadh, fund managers said,
even though any lawsuits are likely to take years to wind
through the U.S. legal system.
One major sector was off-limits to Saudi investors on
Sunday: telecommunications. The securities regulator suspended
trade in shares of four operators after the government decided
to extend their licences and provide them with new "unified"
licences allowing them to offer all telecommunications services;
the regulator said the stocks would be suspended until the firms
had announced the expected impact of the order on them.
Qatar's index edged down 0.3 percent on Sunday as
Barwa Real Estate sank 1.0 percent.
Other major markets in the region, including the United Arab
Emirates and Egypt, were shut for Islamic New Year holidays.
(Additional reporting by Marwa Rashad in Riyadh; Editing by