JEDDAH, 14 December 2004 — I always feel good and optimistic once I enter my office and start starring at the majestic, calm red sea from my window on the 5th floor of Al Mukmal Plaza.
Why not? This year has been the best for BMG especially after its listing a month ago as a full-fledged investment bank and after taking three family groups (of the Top 100 Saudi Companies) go public.
The Saudi stock market had an excellent year, boosted by strong economic growth, excess liquidity, positive corporate results and stronger investor confidence.
The BMG All Shares Index finished the year up almost 60 percent to close at 15,300 points. Market capitalization was up 110.14 percent from a year earlier to stand at SR1,300 billion (about $346.7 billion).
The new entrants in 2006 will include the third mobile operator, Saudia Airlines plus 2 other private ones, 10 new insurance companies of which 2 are reinsurance, 3 fast food chains, 6 family business groups, 3 investment banking firms, 2 tour operators, 3 hospitals, 2 polyclinics groups, a pharmaceutical chain, 2 environmental related companies.
New entrants this year represent almost 150 percent increase from new additions in 2005. The telecom and industrial sectors witnessed another divesture by the government reducing its stakes to 40 percent in STC and to 30 percent in Saudi Basic Industries Corp. (SABIC). In the newly privatized companies, the government will maintain only 25 percent stake.
Six companies accounted for almost 55 percent of total market capitalization including: Saudi Telecom Co. (STC), SABIC, Ettihad Itisalat, Saudi Electricity Company, National Commercial Bank and Al-Rajhi Banking & Investment Corp. (ARABIC).
The Saudi stock market still is the largest in the Arab world in terms of capitalization.
The noticeable increase in trading volume has been triggered by the newly licensed brokerage houses coupled with a new breed of equity research reports.
New brokerage firms are providing even more competitive services that those of the existing banks.
Three companies have approached the debt market by issuing corporate bonds, all of which have been rated by the powerful agencies; Moody’s, S&P and Fitch. These bonds are offered to the local and international markets.
(Basil Al Ghalayini is chief executive officer of BMG Financial Advisors.)