RIYADH, 3 December 2004 — Saudi shares rose to a new record in the week to Thursday, driven by gains in petrochemical and telecoms giants, before profit-taking by investors looking ahead to more initial public share offerings.
The all-share index of the Arab world’s biggest market touched 8,385 points on Tuesday but slipped back to close on Thursday at 8,158 points.
Saudi Basic Industries Corp. (SABIC), the biggest firm in terms of capitalization, jumped to a record SR926.0 ($246.9) early in the week. It fell back to SR870 yesterday, dragging down the market index, which fell 1.3 percent on the day.
The index is still up 86 percent so far this year, its second year of strong growth, fuelled by high oil prices and cash liquidity in the world’s biggest crude oil exporter.
Turnover fell to SR45.9 billion from SR60.7 billion the week before. Sixty-four shares rose and eight fell.
Traders said the market was looking to two share offerings in the coming weeks - bank Al-Bilad and the privatization of state-owned insurer NCCI - which could drain cash from the market as investors apply for stock.
“We expect investors to focus on... carefully selecting stocks ahead of the upcoming IPOs, which are expected to increase selling pressure on speculative stocks while the stocks with strong financial indicators will maintain their levels,” said Bakheet Financial Advisors.
Meanwhile, Kuwaiti shares surged 2.1 percent to post a new all-time high at the close of the week Wednesday despite a looming crisis between Parliament and government.
The Kuwait Stock Exchange (KSE) index finished the week at 6,385.10 points, up from last week’s close of 6,255.10 points. The index is 33.3 percent higher than last year’s close of 4,790.20.
Trading was active throughout the week, recording new highs in value and volume, pushed by a combination of speculation by big investors and sound economic fundamentals, financial analyst Ali Al-Nimesh said.
“Big investors attempted to hike the prices of certain stocks in preparation for selling them, perhaps in a week’s time,” said Nimesh.
Investors need cash to buy stocks in the emirate’s largest initial public offering (IPO) of $340 million to set up a new petrochemicals company. The IPO was launched on Monday. Almost all fundamental economic indicators are sound including high oil prices, better-than-expected nine-month corporate results, a large budget surplus and abundant cashflow, Nimesh said.
But he warned that the future was not very promising because of real risks the market may slide due to political and economic factors.
A political crisis is looming large between the emirate’s outspoken Parliament and the government over a motion to grill a Cabinet minister for alleged corruption.
Nimesh said reports are predicting lower oil prices in 2005 which will adversely affect the Kuwaiti budget.
Average daily trading rose by 46.5 percent to 100.5 million dinars ($340.7 million) from 68.6 million dinars ($232.5 million) last week, up on the average of $213.5 million during the first nine months of this year.
Last year, average daily trading was $223 million compared with $86 million in 2002 and a mere 48 million the previous year.
With a capitalization of more than $72 billion, the KSE is the second-largest stock market in the Arab world. It has 117 Kuwaiti and non-Kuwaiti listed firms.
