Saudi stocks gain 11,000 points for first time since 2008

Saudi Arabia's main stock index pulled back because of profit-taking

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Saudi Arabia's main stock index pulled back because of profit-taking on Monday after earlier in the day breaking through the psychologically important level of 11,000 points for the first time since January 2008.

The main Saudi index was nearly flat in the early afternoon after rising 1.4 percent to 11,051 points and then dipping as much as 0.4 percent. The benchmark had gained in the six previous sessions.

“It's normal profit-taking,” said Maged Ali Hasan, head of brokerage EFG Hermes in Riyadh.

Trading volume soared when the index began falling and shrank when stocks came off their lows, while 14-day momentum was forming a negative divergence - all bearish short-term technical signals that suggested the market might be peaking.

The index had jumped over 13 percent since the kingdom's stock market regulator said on July 22 that it would allow direct investment by foreigners in the first half of next year. It published draft regulations for the reform last Thursday.

Another factor behind the uptrend was expectations that Saudi banks, which are to a considerable extent financed by Islamic deposits bearing no interest, will benefit from the expected rise in U.S. interest rates.

The Saudi riyal is pegged to the U.S. dollar, meaning Saudi rate policy follows U.S. policy.