JEDDAH: KHALIL HANWARE ARAB NEWS STAFF
Published — Saturday 12 January 2013
Last update 12 January 2013 12:32 am
The Saudi stock market is likely to open higher when it resumes trading today after weekend holidays, encouraged by yesterday’s gains in global markets, analysts said.
An improving economic outlook held world stock prices near a 20-month high yesterday.
A massive stimulus plan in Japan also boosted optimism about future business activity, but worries persisted about global demand and a possible drag from the debt ceiling fight in Washington, spurring selling in oil and basic metals.
The Tadawul All-Share Index broke the psychological barrier of 7,000 points mark last week, up 186.4 points and closed at 7,126.71 points. It posted weekly gain of 2.69 percent.
“With the Saudi market enjoying a rally of consecutive positive trading sessions since the start of the year, local fundamentals would push for this trend to continue,” commented Basil Al-Ghalayini, CEO OF BMG Financial Group.
“From a global perspective, this trend might witness a negative impact as the oil tumbling toward $110 a barrel on growing concern that oil demand may be weakening in the short term as global economic activity remains subdued,” said Al-Ghalayini.
Dealers earlier said oil prices spiked to three-month peaks last week as traders took their cue from the China data and reports of a cut in Saudi Arabian crude production.
Jarmo T Kotilaine, a regional analyst, commented: “The Kingdom continues to play a unique role in stabilizing the oil market at a time when concerns about demand erosion persist and non-OPEC production looks likely to accelerate somewhat from last year’s modest pace.”
Kotilaine added: “However, the pattern in this area is likely to remain one of continued volatility as periods of optimism are interspersed with bouts of increased risk aversion. Overall, global oil demand is continuing to go up, although more slowly than previously projected.”
Brent February crude was down $1.95 at $109.94 a barrel, after dropping to $109.60 and having reached $111.95.
US February crude was down 90 cents at $92.92 a barrel, after dropping to $92.65 and having reached $94.13.
Total market capitalization of Saudi stock exchange increased over 2.7 percent to SR1.46 trillion last week as compared to previous week's SR 1.42 trillion.
“Tadawul will probably take its cue from the record highs for global equities last week given the strong correlation, yet my concern in the next few weeks will be centered on another showdown pertaining to the US debt ceiling, with the US Treasury exhausting its extraordinary measures to borrow,” Tamer El Zayat, senior economist at the National Commercial Bank (NCB), said.
He added: “The political polarization in the US will surely impact oil demand prospects negatively in the first quarter and might offset another positive earnings' season for corporate Saudi via the downward pressure on crude prices.”
The MSCI index of world shares was little changed at 349.33 points after rising earlier to 350.15, the highest level since May 2011, Reuters said.
On Wall Street, the three major stock indexes opened lower despite record earnings from Wells Fargo, the No. 4 US bank. The Standard & Poor's 500 index dialed back from its five-year closing high on Thursday.
The Dow Jones Industrial Average was down 24.03 points, or 0.18 percent, at 13,447.19. The S&P 500 was down 3.86 points, or 0.26 percent, at 1,468.26. The Nasdaq Composite Index was down 5.54 points, or 0.18 percent, at 3,116.22.
Europe's FTSEurofirst 300 index of top companies across the region also neared levels last seen in March 2011 shortly after the ECB decision and was consolidating those gains yesterday to be little changed at 1,163.62 points.
In the currency market, according to Reuters, the euro extended Thursday's rally against the dollar, rising 0.45 percent to $1.3327 after touching $1.3365 earlier, its highest since April.
The greenback however strengthened against the yen, rising 0.61 percent to 89.28 yen, a 2-1/2 year high, after the Japanese government agreed a $117 billion spending boost for the economy.