Stronger corporate governance to drive Saudi market interest

Updated 09 June 2015

Stronger corporate governance to drive Saudi market interest

JEDDAH: Saudi Arabia’s stock market (Tadawul) has all the ingredients to do quite well in the coming months, says a top Riyadh-based economist.

The market, which has gained 13.89 percent so far this year, is the biggest in the Middle East. It boasts petrochemical and banking giants that investors will be keen to tap.
The Tadawul All-Share Index (TASI) fell on Tuesday by 0.4 percent to 9,491 points as most local stocks declined. It closed well off its intraday low of 9,426 points though, as buying late in the session lifted the benchmark towards its 200-day average of 9,493 points.
Crude prices jumped 3 percent or more on Tuesday. According to Reuters, Brent futures were up $2, or 3.2 percent, at $64.69 a barrel by 11:25 a.m. EDT (1525 GMT). That was the largest advance on the day for Brent since May 29. US crude futures rose by $1.80 to $59.94.
John Sfakianakis, Middle East director at Ashmore Group, told Arab News that the market’s direction after it opens to global financial institutions next week will depend on corporate results, business confidence, macro stability, oil price trends as well as geopolitics.
“By the end of the year, the stock market is expected to be higher than its current level but how far higher all depends on many factors. This market has all the ingredients to do quite well in the coming months,” he added.
Aleksandar Stojanovski, research analyst, Deutsche Bank AG, commented: “The opening of the Saudi stock exchange to qualified foreign investors (QFIs) is an important event that will have a positive impact on the Saudi equity market as well as the economy. It should have a significant and positive impact to all market participants, including the international banks active in Saudi Arabia.”
Tara Smyth, head of investments for the Middle East at J.P. Morgan Private Bank, said: “Clients in Saudi Arabia are very proud and they are convinced that their market has reached the level of maturity required to take this first step. They salute the change as it reveals the country’s attractiveness and growing economy for foreign investors. A challenge is to further enhance an already robust standard of corporate governance as it will be a leading factor in driving foreign investor confidence in the market.”
Jarmo T. Kotilaine, a regional analyst, said: “Saudi Arabia is a dynamic economy with lots of strong companies across the spectrum. There are particular sectors, e.g. insurance, where some consolidation may be needed and the near-term potential could be less compelling.” 
Mushtaq Ahmed, senior financial analyst at Zughaibi & Kabbani Financial Consultants, told Arab News: “Banks and financial services sector may offer potential investment opportunities due to their favorable business dynamics.”
Fahad M. Alturki, chief economist and head of research at Jadwa Investment, commented: “Since the announcement in late July 2014 that foreign investors would be allowed to invest directly into Tadawul, we have seen a number of developments that have impacted the TASI. This includes a massive drop in oil prices, which negatively impacted investor sentiment and led to panic selling, and the $6 billion initial public offering (IPO) of the National Commercial Bank (NCB), which amounted to the second-biggest IPO of 2014 globally.”
He added: “The Tadawul’s capitalization stands at around two thirds of Saudi GDP, making it larger than the Mexican stock market. When compared regionally, it is almost the same size as all the other equity markets in the Gulf combined. Opening up the market is likely to lead to inclusion into the MSCI emerging market index by mid-2017, with as much as $40-50 billion of total foreign inflows.”
In his comments to Arab News, Sfakianakis further said: “Over time, not from day one, we should expect the market to receive an inflow of foreign money. Foreign investors will get to learn about the market and they will begin to invest at a higher rate. Again over time, foreign investors tend to bring greater institutionalization, transparency and accountability of corporates, a long-term view when it comes to investing which means that investing becomes more sticky and less retain oriented.”
He added: “Foreigners will look for important themes that are more delinked away from oil and geared by demographics such as consumer, food and healthcare themes.”


Taps and reservoirs run dry as Moroccan drought hits farmers

Updated 22 October 2020

Taps and reservoirs run dry as Moroccan drought hits farmers

  • The problems caused by increasingly erratic rainfall and the depletion of groundwater are growing every year in Morocco

RABAT: Two years of drought have drained reservoirs in southern Morocco, threatening crops the region relies on and leading to nightly cuts in tap water for an area that is home to a million people.

In a country that relies on farming for two jobs in five and 14 percent of its gross domestic product (GDP), the problems caused by increasingly erratic rainfall and the depletion of groundwater are growing every year.

In the rich citrus plantations of El-Guerdan, stretching eastward from the southern city of Agadir, more than half of farmers rely on two dams in the mountains of Aoulouz, 126 km away, to irrigate their trees.

However, that water has been diverted to the tourist hub of Agadir, where mains water has been cut to residential areas every night since Oct. 3 to ensure taps in households did not run entirely dry.

“The priority should go to drinking water,” Agriculture Minister Aziz Akhannouch said in parliament last week.

In El-Guerdan, Youssef Jebha’s crop of clementine oranges has been compromised by reduced water supply, he said, which affects both the quality of fruit and the size of the harvest.

“The available ground water is barely enough to keep the trees alive,” said Jebha, who is head of a regional farmers’ association.

“Saving Agadir should not be at the expense of El-Guerdan farmers,” he added, speaking by phone.

‘We hope for rain’

El-Guerdan is not alone in facing drought. Morocco’s harvest of cereals this year was less than half that of 2019, meaning hundreds of millions of dollars of extra import costs.

Despite lower production, Moroccan exports of fresh produce have risen this year by 8 percent. 

Critics of the government’s agricultural policy say such sales are tantamount to exporting water itself, given the crops use up so many resources.

A report by Morocco’s social and environmental council, an official advisory body, warned that four-fifths of the country’s water resources could vanish over the next 25 years.

It also warned of the risks to social peace due to water scarcity. In 2017, 23 people were arrested after protests over water shortages in the southeastern city of Zagora.

In January the government said it would spend $12 billion on boosting water supply over the next seven years by building new dams and desalination plants.

One $480 million plant, with a daily capacity of 400,000 cubic meters, is expected to start pumping in March, with the water divided between residential areas and farms.

Until then, “We hope for rain,” the agriculture minister said in parliament.

In El-Guerdan, the farmers are digging for water. A new well costs $20,000-30,000. However, “there is no guarantee water can be found due to the depletion of ground reserves,” said Ahmed Bounaama, another farmer.