A disastrous week in Riyadh began on 15 April, when the TASI fell by 8.4 per cent to 14,376.01 points the steepest daily fall since 1998, leaving the index at its lowest level since last October. But the nadir had not been reached, with the market ending the week down a total of 17 per cent at 12,919.50 points. Investors appeared immune to positive first-quarter earnings even the release of another batch of record results from the banks. Saudi Hollandi Bank proved a case in point. The bank announced a 55 per cent rise in Q1 net profits to SR 313.8 million ($83.7 million) in mid-April, only to see its share price slump by 4.4 per cent the following day.

Conspiracy theories are beginning to gain increasing credence, with the talk being of the big market players deliberately inducing volatility in protest at recent regulatory changes by the Capital Market Authority (CMA). 'A lack of trust seems to have developed between the major traders and the CMA,' says a Riyadh-based analyst. 'The sad thing is that this is a market ruled by the big players and it is the small investors who are getting hammered.'

Investor disappointment with first-quarter earnings was not confined to Saudi Arabia. For the second quarter running, announcement of record profits by Emaar on 13 April was not good enough for traders on the Dubai Financial Market and the company's share price dropped sharply, bringing the whole market down (see page 42). The Shuaa UAE index closed the week down 11.85 per cent at 4,634.69 points.

The fall-out from the loss of confidence in the GCC's two biggest markets was felt on other Gulf bourses, with only the Doha Securities Market ending the week in positive territory. The Kuwait Stock Exchange fell by almost 3 per cent and even the Omani market, which has so far proved resilient to the turmoil elsewhere, was down by a similar margin.

The effects stretched beyond the Gulf, with Egypt's Hermes index losing some 9 per cent during the week. 'There is a significant amount of Gulf money in local stocks, so naturally there has been some contagion,' says a Cairo-based broker. 'But in terms of fundamentals the situation is different here because valuations are much more reasonable.' GCC valuations are, more abruptly, heading that way too.