'Following large unjustified gains that many traded stocks witnessed in previous weeks, especially speculative-grade stocks, the performance of the Saudi stock market retreated sharply in the week to 2 March,' says Beshr Bakheet, managing partner of Bakheet Financial Advisors (BFA). 'The BFA Top 20 Speculative Index slid 22 per cent versus a decline of 10 per cent for the market index.' Behind the figures was a more human cost, as hospitals reported a number of heart attack admissions from investors who had borrowed at the margin from the banks to buy stocks.

The losses were partly down to a further show of strength by the CMA. Several traders were barred from the market for spreading rumours about certain stocks through internet chatrooms and for engaging in deliberately misleading transactions. Analysts often point to the behaviour of speculative stocks - which frequently see the entire value of their shares change hands in a single day - as a symbol of the excessive exuberance of the TASI.

In another move to control the bourse, the CMA on 23 February issued a ruling reducing the permitted daily fluctuation of a company's share price to 5 per cent from 10 per cent. 'In many ways, this was the right thing to do, but it also sent a signal to already jittery investors that the CMA is worried about the market, and therefore that they too should be concerned,' says a Riyadh-based lawyer.

The market correction should be seen in the context of constantly broken records. 'There is no reason to panic - the market is only back to where it was three months ago. We would prefer to see it back to where it was two years ago,' says the lawyer. The TASI reached a new peak of 20,634.86 points on 25 February. The pipeline of IPOs is constantly expanding, but only one has so far materialised this year, forcing investors to continue ploughing their money into the secondary market.

Few weeks go by without another company announcing plans for an IPO. In early March, Huta Group appointed Saudi Hollandi Bank to arrange its planned share sale and Saudi Pearl Insurance Company stated its intention to go public, adding to well over 30 already on the cards. As in 2005, they are proving slow to come to market. 'This is not necessarily a bad thing,' says another analyst. 'Many of these companies are not ready to be taken public.' However, the secondary market correction has prompted a new urgency and several major IPOs are expected in the next couple of months.