JEDDAH: KHALIL HANWARE
Published — Tuesday 5 February 2013
Last update 5 February 2013 7:50 am
The Saudi stock market has exhibited strong momentum at the beginning of the year in a similar fashion to global equities. The fact that the epicenter of the crisis is doing fine is a testimony of the strength of equities and the growing appetite for risk, with Dow Jones Industrial Average crossing the 14,000 mark, which is the highest since 2007 and the broader S&P 500 off to best start since 1997. The domestic market (Tadawul) is buoyant despite the fact that the 7,000 level remains a psychological barrier.
In January, Tadawul All-Share Index (TASI) closed at 7,043.55 points, gained 242.33 points (3.56 percent) over the close at the end of December 2012. The index gained 6.30 percent compared to the same period of the previous year (end of January 2012).
Highest close level for the index during the month was 7,165.76 as on Jan. 12, according to a Tadawul report.
The Tadawul index closed down 0.11 percent at 7,025.44 points yesterday.
Commenting on the Tadawul’s performance, Tamer El Zayat, senior economist at the National Commercial Bank (NCB), told Arab News: “I do believe that we might continue to see a range-bound movement that might be broken to the upside to around 7,500 in Q2 on the back of robust earnings. Yet, I do subscribe to the theme that global markets have gone too high too soon and that it is likely that equities might exhibit a pull back in the H2, 2013, thus limiting the upside potential for Tadawul this year to a single-digit growth similar to last year.”
In January, total equity market capitalization reached SR 1.44 trillion ($ 383.94 billion), increased by 2.81 percent over the previous month.
The total value of shares traded in January increased by 3.35 percent to SR 128.13 billion ($ 34.17 billion).
The Tadawul report said value of shares traded by individuals was SR 113.15 billion (88.30 percent) for buying, and SR 119.76 billion (93.46 percent) for selling.
The value of shares traded by institutions was SR 12.77 billion (9.97 percent) for buying and SR 7.21 billion (5.63 percent) for selling.
The value of shares traded by foreigners (SWAP) was SR 2.21 billion (1.73 percent) for buying, and SR 1.17 billion (0.91 percent) for selling.
The value of shares traded by Saudis was SR 121.99 billion (95.21 percent) for buying, and SR 123.72 billion (96.56 percent) for selling.
The value of shares traded by the GCC was SR 2.00 billion (1.56 percent) for buying, and SR 1.27 billion (0.99 percent) for selling.
The value of shares traded by foreigners (residents & SWAP) was SR 4.13 billion (3.23 percent) for buying, and SR 3.15 billion (2.45 percent) for selling.
The total number of shares traded reached 4.66 billion shares for the month of January compared to 4.39 billion shares traded during the month of December 2012, thus increasing by 6.03 percent.
The total number of transactions executed during January, however, dropped by 3.74 percent to 2.79 million compared to 2.90 million trades for the month of December.
Asim Bukhtiar, vice president /head of research, Riyad Capital, said: The Tadawul’s January performance benefited from earnings and dividend effect. For the remainder of first quarter, we preclude large movements in the market given the absence of catalysts on the horizon. Surprises may materialize from international headlines and brokers/analysts adjusting outlook for the year ahead as full results become available.”
Jarmo T. Kotilaine, a regional analyst, said: “The recovery we have seen is reflective of the cautious optimism we are beginning to see about the global economy. This has translated into greater optimism in the stock markets and is naturally positive for commodity prices, including oil.”
He added: “Overall, the situation remains mixed with a number of risks on the horizon but the Saudi economy can likely look forward to a good year even if the performance of the oil sector is unlikely to match last year.”
Farouk Miah, head of equity research at NCB Capital, said: “The January performance is encouraging and is a positive sign for the year. For 2013, we expect profit growth of around 12-13 percent for the Saudi market. So even if the P/E multiple remains the same, this should mean the market goes above 7,500.”
He added: “We believe the globally exposed sectors such as petrochemical could perform well given improving global macro outlook, as well as the attractive valuations of the stocks. Earnings growth outlook on the domestically focused areas e.g. retail, telecom and foods remains strong.”