JEDDAH, 10 December 2006 — The negative trend set in October accelerated in November and all six Gulf Cooperation Council (GCC) stock markets were markedly lower over the month. “With losses of four percent and five percent respectively, the Bahraini and Omani stock markets held up relatively well, while the Saudi, the UAE and Qatar markets suffered huge losses,” Bassem El Zein, vice president communications and marketing, Rasmala, said in a monthly review of the Middle East stock markets for November yesterday.
The performance of the North African stock markets was much better as Morocco gained around three percent, Tunisia was slightly higher and Egypt was only one percent lower over the month. The Jordanian market seemed to be affected by the negative sentiment in the GCC and ended the month close to nine percent lower.
“The largest market, Saudi Arabia, is down by around 14 percent for the period as panic selling at one point took the Tadawul All-Shares Index (TAS) index below 8,000 for the first time in around two years before recovering slightly to end at about 8,300,” he said. “The agriculture sector was one of the hardest hit with declines of around 40 percent over the month as speculators exited the market thus removing any source of support for these stocks. The less speculative telecom, banking and industrial stocks also suffered over the month but losses were much lower than the losses seen in other sectors,” he added.
In a significant development, Oger Telecom, a subsidiary of the Saudi Oger company, withdrew its $1.25 billion initial public offering (IPO) on the London and Dubai international stock exchanges, “and it would seem that the negative sentiment in the regional equity markets, particularly Saudi Arabia, has had an indirect effect on the appetite and pricing for this high profile IPO,” El Zein said.
Saudi Basic Industries Corporation (SABIC) has announced its intention to invest about $25 billion in capacity expansion. The investment is expected to increase the overall petrochemical production capacity from the current 47 million tons to about 130 million tons by 2010, thus affirming SABIC’s position as a leading global petrochemical firm.
“In terms of valuations, the Saudi market is now trading at around 16 times forward earnings and remains a bit expensive compared to the GCC and emerging markets’ average of around 14 times. The gap is shrinking however and an investor can find good value in certain blue chip stocks that are trading at very reasonable multiples and are market leaders in their sectors,” he said.
The huge losses in the Saudi markets had an impact on the UAE markets and it seems that the timing of the Dubai Financial Market AED1.6 billion ($435.5 million) IPO was unfortunate as investors rushed to sell shares into a weak market to raise liquidity. The market ended down 13 percent for the period.
At Doha Stock Market’s November losses have taken price earnings multiples and dividend yields to attractive levels but this market continues to suffer from investor apathy. Trading volumes continue to be very weak and concentrated amongst few stocks with Al-Rayan Bank accounting for over half of trading volumes in most sessions.
The Egyptian market witnessed a slight decline during the period despite some decent corporate profit results.
After the very strong performance of the past few months, the Kuwaiti market finished the period on a negative note.
The Omani market witnessed a correction during the period as investors booked profits after the stellar performances over the past few months.
Oman Telecommunications reported a 17 percent increase in its net income figures over the past year.
The Jordanian market ended the period substantially lower as most investors remained on the sidelines and seemed content to take profits at any opportunity amidst little market moving information.
