Weekend switch: Corporate world banks on trade boost

Saudi Arabia’s switch of weekend days to Friday and Saturday from Thursday and Friday has received all-round welcome from the business fraternity and especially from finance analysts.
“This long-awaited implementation of the GCC decision brings Saudi Arabia in line with its neighbors in the Gulf and will increase the Kingdom’s working overlap with international markets,” a finance analyst said.
“That should boost efficiency and productivity in the region’s biggest economy where the average employee sees Saturday as a paid day off. Many companies in the Kingdom have already decided to shift their weekends to Friday and Saturday after Custodian of the Two Holy Mosques King Abdullah’s decree last week. Those companies having decided Thursday and Friday as new weekend days have given a three-day weekend beginning Thursday this week to comply with the decree and enforce the change smoothly.
The new weekend, for example, will make it easier to further open up the Arab world’s largest stock market with a total capitalization of SR 1.5 trillion. The Kingdom is already moving slowly toward opening up to outsiders. Foreign investors shouldn’t hold their breath, but the day they can buy into Saudi stocks may just have been brought forward, Reuters reported.
Commenting on the new weekend change, John Sfakianakis, chief investment strategist at Masic in Saudi Arabia, said: Financial institutions will be able to be better aligned with the rest of the world and react to events in a more timely manner. That helps efficiency mitigate trading excesses.”
He said: “Banks and their clients will be able to transact globally more quickly as an extra day does make a difference in terms of pricing, transacting on payments, opening letters of credit and other trade finance operations would be available for three days only under the old system. We aren’t going to see necessarily more business transactions and higher volumes but also efficiency gains, which translates into higher productive efficiency. Higher productivity at the national level is the way to raise living standards and as a consequence of real incomes over time.”
Sfakianakis added: “The economy will be more in sync with the rest of the world; the move provides a 20 percent increase in common working time with most global markets, and that is a positive thing. Having said that, when global markets react in a positive or a negative way, there would be a more immediate reaction reflected in local stocks due to the extra trading day. Also, the way retail investors manage their portfolios will also change given that they will have an extra day of trading that will align their positions based on regional and global events.”
The old system allowed for too many unknowns over the Thursday-Friday weekend which forced many to take short-term market views as a way to minimize risk. From an intra-regional perspective it will make businesses more aligned and more efficient, he said.
“Consumption habits will also change as a result of the weekend changes and Fridays will become more family-oriented and Saturdays will become more of consumer-driven and high traffic-oriented,” Sfakianakis said.
“For banks and Tadawul the weekend shift will mean coordination with much of the rest of the region, which will facilitate and in many cases accelerate investment flows and transactions in the GCC. The same effect will apply to transactions with other foreign banks where the overlap has now increased by one day, or a full third, as compared to the old working week. As investment flows between Tadawul and the rest of the world increase, this effect will grow in importance,” Jarmo T. Kotilaine, a regional analyst, said.
In general, he said the closer coordination should more business opportunities and faster transaction times and in that sense be supportive of growth, even if the direct impact may be fairly limited.
Farouk Miah, head of equity research at NCB Capital, said: “We believe that matching the weekend with regional countries will have a positive effect on volumes in the Saudi stock market as investment firms in countries such as the UAE and others based in the rest of the world did not operate on Saturdays.”
However, he said: “With 48 Thursdays in a year, Saudi Arabia missed out on the probable economic benefit of a month and a half per year, it has been argued.”
Currently there are only three overlapping days between the working week in Saudi Arabia and the Western world (Monday-Wednesday) and four days with the rest of the region (Sunday-Wednesday), he said.
Miah said Saudi companies with operations and interactions with suppliers/partners throughout the region will be the key beneficiaries as the working week between the head office in Saudi Arabia and operations/partners in the rest of the region will now be fully aligned, thus facilitating business and trade.
Asim Bukhtiar, vice president/head of research at Riyad Capital, said: “The change in weekend will better align business days with international markets. Banks and consumers will benefit from shorter settlement period for cross-border transactions such as remittances.”
Bukhtiar said: “Staff of multi-national companies will cheer this news as the weekends will be more synced with home offices. The economic impact is difficult to quantify, however the ease of doing business in the Kingdom will certainly improve.”
President of the Naif Arab University for Security Jamaan Rashid ben Ragosh said the royal order switching holidays to Friday and Saturday reflected the desire of King Abdullah for the better performance of the Kingdom’s economy.
“This decision will produce positive results in the national economy in the business and other sectors that have links with international institutions, especially with its membership in G20,” Ragosh said in a statement yesterday.
The new change will also help improve the university’s relations with various international institutions and organizations in the field of security sciences, he added.