While shares of Saudi Arabian petrochemical companies have a very strong correlation to oil prices, the overall stock market's relation with crude isn't that clear-cut, even given the dependence of the kingdom's economy on oil prices, Riyadh-based investment bank Jadwa Investment said.
"Although Saudi Arabia is predominantly an oil-based economy, the stock market does not have a close relationship to the global oil market. None of the companies listed on the stock market give direct access to the oil industry, which is dominated by state-owned Saudi Aramco," Jadwa's head of research Paul Gamble wrote in a recent research report.
The correlation of the benchmark Tadawul All Share Index (Tasi) to oil prices over the past three years is 0.68, while that of the petrochemicals sector is 0.89. "There has been a clear divergence between the Tasi and oil prices for much of the recent past," Gamble said.
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