Gulf stocks end 2015 in negative territory

Updated 31 December 2015

Gulf stocks end 2015 in negative territory

KUWAIT CITY: Stock markets in the Gulf states ended 2015 in negative territory on Thursday, following a massive decline in oil prices and regional turmoil.
The Saudi stock market led the slide by shedding 17 percent in 2015 followed by Dubai which dipped 16.5 percent.
The market value of the seven bourses dropped by $110 billion to $930 billion in 2015.
“The persistent decline in oil prices, though expected, hit the domestic economies very hard,” M.R. Raghu, head of research at Kuwait Financial Center Markaz, said.
“It negatively affected spending and private investors.”
“Stock markets were also impacted by geopolitical factors which pushed investor confidence down,” he added.
The Chinese slowdown and the hike in US and domestic interest rates also fueled the slide, Raghu said, with most losses taking place in the second half of the year.
Trading was highly volatile on most bourses, which dropped to multi-year lows.
And there is no cause for optimism for next year, Raghu said.
“2016 will be a very challenging year,” he said.
“Nobody is hopeful of any recovery in oil prices, which are expected to remain below $50 a barrel, and corporate earnings are expected to be flat.”
The Saudi Tadawul All-Shares Index (TASI) shed 17.06 percent at 6,911.76 points, dropping for the second year in a row.
The Dubai Financial Market (DFM) Index posted its first annual loss after four years of sustained gains, ending the year down 16.5 percent at 3,151.00 points.
The Abu Dhabi Securities Exchange was the best performer among the Gulf bourses, but still shed 4.5 percent to finish the year on 4,307.3 points.
The Qatar Exchange, the second largest in the Gulf, fluctuated sharply during the year to close at 10,429.4 points, down 15.1 percent.
The Kuwait Stock Exchange dropped 14.1 percent to close on 5,615.12 points, after dipping to an 11-year low in December.
The Muscat Securities Market ended 2015 down 14.8 percent at 5,406.22 points, while the tiny Bahrain bourse dropped by a similar percentage to close on 1,216 points.


Investment and energy experts welcome ‘sensible’ Saudi Aramco IPO valuation

Updated 11 min 31 sec ago

Investment and energy experts welcome ‘sensible’ Saudi Aramco IPO valuation

  • Price regarded as a sensible compromise and that it will sell the IPO
  • Experts said the Aramco valuation was justified by the financial metrics

DUBAI: Investment professionals and energy experts delivered a mainly enthusiastic response to the pricing of shares in Saudi Aramco and the overall valuation of the biggest oil company in the world at between $1.6 trillion and $1.7 trillion.

Al Mal Capital, a Dubai-based investment bank, said that it was positive on the Aramco initial public offering (IPO) on that kind of valuation, which it said was justified by the financial metrics.

“We believe Aramco’s IPO is a central pillar of Saudi Arabia’s Vision 2030. In our view, the broader privatization of state assets will likely accelerate the flow of foreign capital into the Kingdom, improve liquidity and transparency as well as continue to help diversify its economy away from its dependency on oil. While many investors were skeptical about the ability of Saudi Arabia to roll out its ambitious agenda, they seem to be right on track.”

Tarek Fadhallah, chief executive officer of Nomura Asset Management in the Middle East, said via Twitter: “My first impression is that the price is a sensible compromise and that it will sell the IPO. Aramco should easily raise the $8.5bn from retail investors but the 29 global coordinators, managers and financial advisers will need to find the other $17 billion. A few billion from China would help.”

Robin Mills, chief executive of the Qamar Energy consultancy, said; “I think it’s a reasonable compromise. The price is well above most independent valuations but well below the aspirational price. It implies dividend yields a bit lower than the super-majors (the independent oil companies), but a similar price earnings ratio (the measure of the share price rated according to profits). Retail and local investors should be sufficient. We’ll have to see about the foreign investors.”

Ellen Wald, energy markets consultant and author of the book Saudi, Inc., said American investor would still be undecided on the IPO. 

“Remember, investors don’t put money in because they think the value is accurate. Smart investors put money in because they think the value will rise. It all depends on whether they see signs the price will rise during their time frame.”

American oil finance expert David Hodson, managing director of BluePearl Management, said: “This valuation seems to be more reasonable based on the fundamentals. Potential investors in Western markets will base their decision on cold hard facts like dividends and growth prospects. From what we now know, Aramco is offering them a compelling investment proposition to consider.”