Gulf markets reverse earlier gains on profit-taking, with trading volumes thin

Abu Dhabi Commercial Bank lost 0.9 percent after it merged last week with Union National Bank and Al Hilal Bank to create a banking heavyweight with 423 billion dirhams in assets. (Reuters)
Updated 05 May 2019

Gulf markets reverse earlier gains on profit-taking, with trading volumes thin

  • The Saudi index was the worst hit in the Gulf, losing 1.7 percent, pulled down by heavyweight names in the banking and petrochemical sectors
  • The Abu Dhabi index lost 0.3 percent, pulled down by RAK Properties, which dropped 4.5 percent on lower first-quarter profits

DUBAI: Middle East stock markets reversed earlier gains and closed in negative territory on Sunday, hit by profit-taking and disappointing quarterly results from some companies, with trading thin ahead of Ramadan.

The Saudi index was the worst hit in the Gulf, losing 1.7 percent, pulled down by heavyweight names in the banking and petrochemical sectors. Al Rajhi Bank, Saudi Arabia’s second-largest lender by assets, lost 2.5 percent and Alinma Bank shed 1.7 percent.

“We continue to play the banking sector through Al Rajhi Bank, National Commercial Bank, Saudi British Bank, and Bank Aljazira, which have all delivered stellar results in Q1,” Dubai-based Arqaam Capital said in a research note.

“However, upsides to FVe (fair valuation estimates) have almost been closed, while earnings growth should slow in the coming quarters as Saibor (the Saudi interbank rate) has stabilized.”

Blue-chip Saudi Basic Industries Corp. lost 1 percent, while Saudi Kayan Petrochemical Co. shed 1.7 percent, despite an increase in oil prices at the end of last week. In Dubai, where the index shed 0.2 percent, Islamic Arab Insurance rose 14.9 percent and was the day’s most heavily traded stock on the exchange. Dubai Islamic Bank was the second most traded, adding 1.4 percent.

The Abu Dhabi index lost 0.3 percent, pulled down by RAK Properties, which dropped 4.5 percent on lower first-quarter profits. Abu Dhabi Commercial Bank lost 0.9 percent after it merged last week with Union National Bank and Al Hilal Bank to create a banking heavyweight with 423 billion dirhams ($115.2 billion) in assets, the third biggest in the United Arab Emirates.

In Egypt, where the index lost 2.4 percent, Orascom Investment Holding posted the highest volume and dropped 0.7 percent. Real estate company Emaar Misr for Development (EMFD) fell 3.2 percent after reporting a 17 percent drop in Q1 earnings.

“2019 started slow for EMFD after a robust performance last quarter for sales and handovers, which might not be exceeded or met this year,” Arqaam Capital said in a separate note.


Virus pressure tests Saudi Arabia reforms as Aramco has Forbes debut

Updated 28 May 2020

Virus pressure tests Saudi Arabia reforms as Aramco has Forbes debut

  • ‘In terms of profits, the Saudi companies have done well. We will see more companies rising in the next few years

RIYADH: Saudi companies such as oil giant Aramco are displaying resilience in the face of the coronavirus pandemic because of reforms introduced before its arrival, say analysts.

The world’s largest oil company has become emblematic of wider corporate reforms triggered by the Saudi Vision 2030 blueprint for social and economic change.

Saudi Aramco this month appeared in the top five of the Forbes Global 2000 list, which ranks the world’s 2000 largest companies.

It comes as the world’s most profitable company reported profits on $88.2 billion last year.

This year’s rankings arrive amid a global pandemic which has devastated the earnings of some companies, improved the position of others and tested the resilience of all.

It has also shone a spotlight on the ability of the the Kingdom’s top companies to withstand the twin shock of the COVID-19 lockdown and the collapse of oil prices.

Saudi Aramco debuted on the prestigious Forbes list after completing the world’s largest initial public offering last year.

The rankings are based on a combination of sales, profits, market capitalization and assets. Three of the top five companies on the list are from China, including Industrial and Commercial Bank of China in the top spot for the eighth straight year with more than $4.3 trillion in assets.

Forbes noted that many of the companies on its list have come through a particularly difficult first quarter as a result of the COVID-19 pandemic, or what it describes as “The Great Cessation.”

“Many companies and organizations have faced difficulties in managing and mitigating the impact of COVID-19 crisis. However, there are some companies that have prepared well and put in action plans to avoid this crisis with the least damage,” said Fahad Alfaifi, a Saudi-based strategy and business planning consultant.

The pandemic has come at a time of historic change in the Kingdom’s corporate landscape driven by economic reforms which form a major part of the Vision 2030 agenda. This aims to reduce the country’s reliance on oil revenues and stimulate investment in sectors of the economy that create new jobs for a youthful population.

This backdrop has meant many companies in the Kingdom were already changing the way they did business before the arrival of the pandemic and the collapse of oil prices created new challenges.

Last year’s annual Global Competitiveness Report, issued by the World Economic Forum, placed the Kingdom third among G20 counties and 11th globally

in terms of IT governance which rates a country’s ability to adapt digital technologies such as e-commerce and financial technology.

Such technology skills are becoming increasingly important for economies as they to re-calibrate and adapt to the post-pandemic world.

Nasser Al-Qarawee, the director of the Saudi Study and Research Center, attributed the success of some Saudi companies to the great achievements made by the private sector lately and predicted that more Saudi companies would eventually join Aramco on the Forbes list.

“The national economy has seen enormous improvements and development in terms of laws and legislation that have helped reduce restrictions and bureaucracy, while the government has worked at the same time on reducing dependency on oil. Vision 2030 will further cement the Kingdom’s strong presence globally and make it have a larger influence on global decisions, not only economically but also politically.”

Tawfiq Al-Swailem, CEO of the Gulf Bureau for Research and Economic Consultations, said that many Saudi companies would emerge from the pandemic in a strong position.

“In terms of profits, the Saudi companies have done well, although the entire world is living through a state of ferocious economic war,” he said. “We will see more Saudi companies rising in the next few years.”