RIYADH, 2 July 2003 — Saudi shares ended a robust half year up 43.5 percent on the back of high liquidity, strong oil prices, better-than-expected public revenues and rising investor confidence, analysts said yesterday.
The Tadawul All-Shares Index (TASI) finished the first six months of 2003 at 3,612.89 points over last year’s closing of 2,518.08 points. TASI, which made most of the gains in the second quarter, hit an all-time high of 3,644.29 points on June 16 after the Cabinet endorsed the Capital Market Law to establish a formal stock exchange in the Kingdom. Profit-taking sales in the last few days slightly eased off the Index.
The capitalization of the largest bourse in the Arab world shot to $127.3 billion, mainly after the listing on Jan. 25 of Saudi Telecom which became the undisputed market leader. “The removal of the uncertainty factor following the US-British war in Iraq has greatly boosted investor confidence,” said Mussa Raza of the Consulting Center for Finance and Investment (CCFI).
“Liquidity reached unprecedented levels because investors opted to keep their funds in the country after the Sept. 11, 2001 attacks (on the United States). This has generated great confidence and induced activity,” Raza told AFP.
Strong oil prices and better-than-expected revenues in the first half of the year also consolidated the market, he said.
Turnover skyrocketed to $57.2 billion, almost equal to the combined turnover of 2001 and 2002 of $57.9 billion, an indication of unprecedented activity in the Saudi bourse.
Banks and market leaders Saudi Telecom, Saudi Basic Industries Corp. (SABIC) and Saudi Electricity Co., which together make up more than 80 percent of the capitalization, were instrumental in the market’s positive performance.
Saudi Telecom gained a healthy 129.6 percent and its market value rose to $31.2 billion. It accounted for more than 27.6 percent of trading value in the first six months of the year.
The index of the banking sector, accounting for one-third of market capitalization, rose 13 percent, the electricity sector gained 74.4 percent while the industrial sector was up 35.9 percent.
The number of listed firms on the Saudi bourse stands at 69, which economists say is very small in a country where thousands of companies operate.
The Saudi bourse ended last year up just 3.6 percent over 2001 closing mainly because of jitters over US-British threats to launch war against Iraq. The value of the market stands at around 68.5 percent of the Kingdom’s gross domestic product (GDP) of $186 billion at the end of 2002. Turnover equals 30.7 percent of GDP. “The market is likely to cool slightly in the summer months, but is expected to resume its upward trend in September,” Raza said.
Trading is still carried out on an interbank basis, but the Kingdom is expected to have its formal stock market, with an independent commission to oversee and regulate trading, within six months.
Currently, the Saudi Arabian Monetary Agency (SAMA), or central bank, controls the market, which was established in 1985. The stock market has so far been limited to a small number of dealers.
Despite the partial sell-off of Saudi Telecom, the Kingdom’s major economic powerhouses, like Saudi Arabian Airlines and the National Commercial Bank, are not yet listed.
