Saudi Stock Index at 7,000

More than a year ago I said that Saudi stock market levels around 20,000 were insane and that I thought the index would reach the 7,000-8,000 level. Most people thought I were insane. In fact, Saudi Commerce and Economic Review, the magazine I used to write a monthly column for, refused to publish my article where I made that prediction and because of that I stopped writing for them. Well, TASI today stands at 7,274 up from yesterday’s close at 7,180. So now that my prediction turned out to be correct, where is the market heading? That, unfortunately, I can’t predict. Those who know and/or share my style of financial analysis understand that predictions are very hard unless markets or stocks are way off the market. In other words, I can’t predict if a stock or a market (it’s much more difficult with a whole market) is overvalued or undervalued by 10 or 20%, but I can tell you it’s 50% over- or undervalued. TASI now stands in that difficult-to-predict range, so I can’t tell you if it will continue its downward spiral. However, the fact that it is in this range makes me believe that while I don’t know where the next 2,000 points are going to be (to 5,000 or 9,000) I think it’s safe to assume that today’s levels are much more closer to economic reality that a year ago. Note, however, that I don’t think the market is cheap, at least It’s not seriously undervalued, but it’s within a reasonable range of fair value.