JEDDAH/AMMAN, 1 September 2007 — Arab stock markets continued their strong performance last week as investors seemed to restore confidence in the regional bourses following the turmoil that swept international stock exchanges two weeks ago, analysts said yesterday.
They attributed the rally partly to the low prices of Arab stocks, the return of Arab funds to regional markets after the plunge at world bourses and the adamantly soaring prices of crude oil which was expected to ensure comfortable surplus petrodollars for Arab countries.
Saudi shares rallied last week, driven by the banking sector gains and the Saudi Cabinet’s decision to allow citizens of the Gulf Cooperation Council (GCC) member states to trade Saudi stocks on equal footing with Saudi citizens.
The Tadawul All-Share Index (TASI) gained 1.70 percent, closing at 8,226.97 points up from 8.089.09 points previous week. TASI is currently 3.7 percent higher than the year’s start.
The Riyadh-based Bakheet Investment Group (BIG) expected Saudi stocks to make benefit from a reported return home of Saudi funds following the recent crisis at global markets and a “noticeable increase in liquidity” at the Saudi bourse.
However, the report warned that the third quarter results, particularly of blue chip firms, would represent the “cornerstone” that decides the direction of the market in the coming weeks.
“Noticing the increase of liquidity in the market heading to the Saudi stock market and in trading value, in addition the vanishing of the zig-zaging performance witnessed in previous periods and the positive financial ratios of the blue ships, all of these positive facts might drive the market toward a continuing increase,” BIG said in its weekly report.
The BIG said: “The Saudi Council of Ministers’ decision will take the market to the next level by removing restrictions like not to own more than 25 percent in the banking and insurance sectors. This decision will have a positive impact on the TASI where the banking sector holds a heavy weight,” adding that the banking sector has an attractive PE ratio varied between 12 to 17 times. This is the lowest average PE ratio among Gulf banking stocks.
Analyst Abdul Hameed Al-Amri, a member of the Saudi Economic Society, expected that the return of confidence in the market and increased liquidity would push the index to 8,305 points soon. “I believe that the rising trend of the general index will pave the way for taking the index to 9,000 points in the long run as there are no resistance levels close to it except at 8,956 points and this will lead to reaching the level of about 11,740 points,” he explained.
Shares of insurance companies made hefty gains last week. Shares in Saudi Indian Company for Cooperative Insurance and Allied Cooperative Insurance Group, which started trading last week, jumped 1,502.50 percent to SR160.25 and 1,225 percent to SR132.50, respectively.
Alahli Takaful Company shares surged 53.51 percent to SR246 and Malath Cooperative Insurance and Reinsurance Company by 28.87 percent to SR154 last week.
The other major gainer last week was Tabuk Agriculture. Its shares increased by 31.40 percent to SR79.50.
Saudia Dairy and Foodstuff Co. (SADAFCO) shares dropped 8.06 percent to SR57 and Saudi Arabia Refineries Co. (SARCO) by 3.46 percent to SR251.
The stock market turnover also increased to SR56.84 billion last week compared to SR52.56 billion in the previous week.
“I believe investors are restoring confidence in regional markets after the turmoil on world bourses, where huge Arab funds have been operating,” Amman-based analyst Wajdi Makhamreh told Arab News.
Jordanian shares lost further ground last week due to the retreating liquidity and forced selling of stocks to close positions of clients as the month of August drew to a close, Makhamreh said.
The all-share price index of the Amman Stock Exchange shed 0.6 percent to close at 5,610 points down from previous week’s close at 5,643 points, according to the ASE weekly report.
Makhamreh expected Jordanian stocks to come under further liquidity pressure ahead of the third quarter results.
Kuwait’s KSE all-share price index gained 0.8 percent last week, closing at 12,686 points compared with previous week’s close at 12,584 points.
The performance of the United Arab Emirates bourses improved in response to the pick-up at global markets and the influx of fresh liquidity, analysts said.
The all-share price index of the UAE stock exchanges of Dubai and Abu Dhabi went up by 1.8 percent, closing week at 4,373 points from 4,302 points previous week. The UAE benchmark price gained 8.48 percent since the start of the year.
Analysts expected the UAE bourses to receive momentum from a reported bid by the Dubai Stock exchange for buying Nordic exchange OMX. The GulfBase GCC index also edged higher by 1.34 percent to 5,607.60 points last week. The value of GCC traded shares increased by 11.72 percent to $20.79 billion and volume surged 17.62 percent to 5.98 billion shares.