JEDDAH, 14 August 2005 — After two record years, the Saudi stock market seems to be heading for yet another record year with no sign of changing direction. The Tadawul All Share Index (TASI) hit an all-time high and crossed the 14,000 mark for the first time yesterday. The index closed yesterday at 14,198.06, up 267.57 points or 1.92 percent from Thursday’s closing of 13,930.49 points.
Saudi Basic Industries Corp. (SABIC), the Kingdom’s largest listed firm in terms of market capitalization, was trading 5.67 percent higher at SR1,529 yesterday. The share price of SABIC, with 73 percent weight in the industrial sector and around 26 percent in the whole market, rose 113 percent in the first six months of 2005.
High profitability growth, low interest rates along with high liquidity, higher oil prices and its ripple effects on the various sectors of the domestic economy are the major drivers of the Saudi stock market this year. The market rally is projected to continue on the expectation of 35 percent earnings growth in 2005.
“This is a new milestone for the Saudi Stock market, which reinforces the momentum that we have seen during the past several months. The Saudi market is expected to maintain its strong performance, at least for the near term, and in the process will reach new uncharted territories. The main catalysts for this strong drive are the sustained global oil demand in spite of the current high prices, high liquidity in the Saudi economy, outstanding performance of the Saudi initial public offerings (IPOs), and superior year-to-date performance of the Saudi stock market compared to leading global markets,” a Riyadh-based Investment/Financial Consultant Salim J. Ghalayini told Arab News.
He added, “A $10 increase in the price of one barrel of oil will translate in annual income increase of SR100 billion for Saudi Arabia. Investor enthusiasm and positive conditions will place pressure on the actual results and the PE - price earning ratios of the major Saudi companies. A sustained good performance will help diffuse any stock market bubble that might otherwise develop.”
Financial analysts expected that the coming weeks would see more people investing in Saudi stocks despite a rise in prices. They attributed the increase in investment in stock market to rising liquidity.
Bakheet Financial Advisors, however, cautioned the investors saying that skyrocketing oil prices would have limited impact on the profits of some companies listed on the bourse.
The Industrial sector index made a hefty gain of 1,660.40, or 4.71 percent to close yesterday at 36,885.27 points. The Services sector index was also closed higher at 3,930.44, up 57.83 points or 1.49 percent.
The Telecom and Electricity indices were also higher yesterday.
However, the Cement sector index fell 49.79 points or 0.55 percent to close yesterday at 8,963.14 points followed by Insurance index, which was down 6.24 points or 0.37 percent at 1,674.89 points.
Out of 76 stocks traded yesterday, 55 were higher.
According to the National Commercial Bank (NCB) report, the market capitalization of the Kingdom’s 76 listed stocks has reached around SR1.94 trillion ($517 billion) on June 30, 2005, compared to SR1.15 trillion ($306 billion) at the end of December 2004, adding SR791 billion ($211 billion) to the wealth of investors.
