Saudi Arabia's stock market closes at highest level since August 2015

Saudi Arabia's stock market closes at highest level since August 2015. (REUTERS)
Updated 27 March 2018
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Saudi Arabia's stock market closes at highest level since August 2015

LONDON: Saudi stocks surged to their highest level in nearly three years on Tuesday, as investors continued to bet on the Kingdom’s equities being upgraded to emerging market status by widely tracked index providers. 
The Tadawul finished up 1.1 percent at 7,942.54, its highest close since August 2015, and the day before index provider FTSE Russell announces whether it will include Saudi Arabia in its emerging markets category.
Such an inclusion is predicted to attract billions worth of passive inflows into the Middle East’s largest stock market, with a similar upgrade to emerging market status by rival index provider MSCI widely expected to be announced in June, and forecast to attract even more international funds. 
“If FTSE says yes (on Wednesday) then people will assume that MSCI will say yes in June, which is the reason the market’s been showing such strength recently,” said Mohammed Al-Hajj, vice president and head of MENA strategy at investment bank EFG Hermes. 
Such upgrades may attract up to $45 billion worth of inflows from foreign investors, Al-Hajj noted, with about $14 billion coming from passive inflows from international funds that allocate a set proportion of their portfolios to emerging markets. 
Saudi stocks missed out on an emerging market upgrade at FTSE’s last classification meeting in September, but are widely expected to make the cut on Wednesday. 
Such an upgrade is also expected to be announced in June by MSCI, which last month noted that the Kingdom had implemented “a number of positive market reforms” in the past 18 months, including relaxing foreign ownership restrictions on local stocks, reducing settlement times and introducing short selling. 
The growing anticipation of such upgrades, which would formally come into effect next year, has boosted Saudi equity values; after a flat 2017 the Tadawul is up 9.9 percent since the start of the year, making it the GCC’s best performing bourse. 
Banks in particular are set to benefit from any reclassification by MSCI and FTSE, said Al-Hajj, with lenders benefiting from rising interest rates in the Kingdom. 
The Saudi Arabian Monetary Authority last week raised its two key interest rates — its repo and reverse repo rates — by 25 basis points, after the rates fell below US rates in recent weeks. 
“The increases are credit positive for Saudi banks because they will prevent Saudi investors’ and depositors’ capital outflows and positively reflect the Saudi banking system’s stable liquidity conditions,” said Moody’s Investors Service in a comment note last week. 
After tightening lending conditions in 2015-16 following a fall in oil prices, liquidity conditions have begun to improve for Saudi banks, Moody’s noted, with credit contracting by 1 percent last year and public-sector deposits increasing 12 percent, underpinned by “improving oil prices and increasing international sovereign bond issuances.”
Banks were among the big gainers on the Tadawul on Tuesday. Shares in NCB and Al-Rajhi Bank, the country’s two largest lenders by market capitalization, rose by 1.3 percent and 1.4 percent respectively. 
Insurance firms, health care providers and fast-moving consumer goods companies are also forecast to be key beneficiaries of emerging market upgrades, according to EFG Hermes, which rated the sectors as overweight last month. 


Lebanon’s Hariri calls for cabinet solidarity in budget debate

Updated 18 June 2019
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Lebanon’s Hariri calls for cabinet solidarity in budget debate

  • The PM said cabinet ministers need to be united and responsible
  • Lebanon’s debt is almost 150% of its GDP

BEIRUT, June 18 : Lebanon Prime Minister Saad Al-Hariri on Tuesday called for parliament to quickly approve the country’s 2019 budget and urged his coalition government to avoid internal disputes.
The cabinet this month agreed a budget plan that shrinks the projected fiscal deficit by 4 percentage points from last year to 7.6% by cutting spending and raising taxes and other fees.
“What I want during the debate is for us to be responsible and united, and not contradictory,” Hariri said in a statement, addressing cabinet ministers as to their comportment during the parliament debate.
Parliament’s finance committee is debating the draft budget and has suggested amendments, local newspapers reported. It will then put the budget to the full assembly to ratify it.
Parliament is mostly composed of parties that are also present in the coalition government and which supported the budget there.
Since the budget was agreed there have been fierce arguments between parties in the coalition over several subjects, though these have not targeted the budget.
Lebanon has one of the world’s heaviest debt burdens, equivalent to about 150% of GDP, and the International Monetary Fund has urged it to cut spending.
“We have held 19 cabinet meetings to agree on this draft budget and these sessions were not for fun, but for deep, detailed debate over every clause and every idea,” Hariri said.
“For this reason, I consider it the responsibility of each of us in government to have ministerial solidarity...to defend in parliament the decision that we have taken together,” he added.
After the 2019 budget is agreed, the cabinet must quickly start working on the 2020 budget and on approving the first phase of a program of investments toward which foreign donors have offered $11 billion in project financing. (Reporting by Angus McDowall, editing by Ed Osmond)