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HISTORY AND OVERVIEWeconomic conditions, Tadawul was the most liquid market in GCC with an average dailyturnover of USD2.08bn in 2008. In terms of trading volumes, the petrochemical sector was themost active in 2008, experiencing margin growth led by record oil prices in the first half followedby plummeting end-products prices and severe loss of demand in the second.Exhibit 35: Pricing multiples – TASI302520151050Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08P/E multipleP/BV multipleSource: BloombergWith the downturn in the economic outlook and market performance alike, valuations in KSAhave declined sharply. Tadawul’s P/E, which at the start of May 2006 was 27.6x, decreased to22.2x on 30 December 2007, before reaching 10.7x on 28 December 2008. TASI’s 41% gainsregistered in 2007, as it recovered from the big crash of 2006, were wiped clean in 2008, whereit lost 56.5% of its value, as the oil bubble burst. TASI’s 12M trailing price-to-earnings (P/E) andprice-to-book value (P/BV) multiples contracted 49.0% and 59.2%, respectively, during 2008.However, the multiples have improved considerably in the quarter under review. From a low of11.2x on 03 March 09, the multiples are currently trading at a level of 18.4x (17 May 2009),translating into a correction of approximately 65%. This rally is largely led by improved marketsentiments along with government support measures. Despite this correction, the market looksattractive on a 1-year forward P/E multiple; dropping from a high of 35.2x to 10.78x in 2008.Insurance sector was theExhibit 36: Sector wise performance and returns in 2008worst performing sector in20080(2,000)(4,000)(6,000)(8,000)(10,000)(12,000)(14,000)(16,000)(18,000)Banks/financialPetrochemicalCementRetailEnergy/utilitiesAgri/foodTelecom/ITInsuranceMulti invIndustrial invConstructionReal estateTransportMedia/publishingHotel/tourism0%-10%-20%-30%-40%-50%-60%-70%-80%Net change% changeSource: Tadawul, NCBC ResearchJUNE 2009SAUDI ARABIA FACTBOOK34