JEDDAH, 8 April 2007 — Regional stock markets were very mixed during March with half the markets monitored ending in the red after a positive February. Saudi Arabia reversed trends in the later half of the month to lose half of its February gains, according to a Middle East market overview.
The Saudi Tadawul Index closed at 7,666.1 or 8.5 percent lower than the previous month. The February rally extended to the first half of the month before the market suffered strong profit taking and lost all its YTD gains. “Importantly, trading volumes showed a clear improvement and the SR20 billion average daily trading volume was one of the best since September 2006,” said the report prepared by Khaled Al-Masri, executive partner of Rasmala, a Dubai-based regional investment bank with operating subsidiaries in Riyadh and London.
These large volumes were concentrated in the services and agricultural sectors whose 85 percent share of the trading volumes is a clear sign that this market remains in the grip of speculators. There was however increasing interest in Emaar — The Economic City, which was the most actively traded stock and ended the month around six percent higher. “The telecom sector was one of the worst performing sectors over the month as Saudi Telecom came under pressure losing around 13 percent of its value with fears that its monopoly is being further eroded by new entrants,” the report said.
“During the month, the MedGulf’s SR200 million IPO (initial public offering) went well and was oversubscribed around four times while Al-Rajhi Bank’s announcement of a bonus issue was not well received by the market,” the report said and pointed out that SABIC (Saudi basic Industries Corp.) has announced to build two new petrochemical plants for its envisaged growth plan to double its overall petrochemical output. Mobily has raised a $2.8 billion Islamic loan to fund its expansion and continues a trend of Islamic financing solutions becoming the preferred financing instrument for regional corporates.
The Dubai market sank into depression due to the negative sentiment generated by developments at Emaar among the investor community. Morocco added to its gains of the previous months to be the best performing market of the region with 20.2 percent return YTD while the other North African markets of Tunis and Egypt continued to outperform their larger GCC peers. Kuwait was the second best performing market over the month and is now the only GCC market with a positive YTD return, while the Qatari market continues to suffer from a shortage of liquidity despite valuations having reached attractive levels after its 2007 losses reached 15 percent.
The Dubai market abruptly ended its reasonable start to 2007 with the DFM Index closing almost 11 percent lower for the month.
The Abu Dhabi market could not avoid the negative sentiment from Dubai, but in losing 6.70 percent during the month, performed relatively well.
The Kuwaiti market was the best performing GCC market with a 4.6 percent gain for the month and is now the only GCC market with positive YTD returns. “The telecom sector continued to make the news in Kuwait as a consortium led by MTC won Saudi Arabia’s third mobile license for $6.08 billion, which is significantly higher than the amount paid by Etisalat for the second license,” the report added.
The Omani market ended the month with a loss of 3.5 percent which erased the gains made during the first two months of the year.
The Qatari market continued its poor performance with a loss of 4.2 percent in March thus taking its 2007 losses to around 15 percent making it the worst performing market in the MENA region in 2007.
The Bahraini market was the only GCC market apart from Kuwait to end the month in positive territory after reversing its early weakness toward the end of the month to close around one percent higher for the month.
