Saudi banks made a late surge on Monday to help the Kingdom’s benchmark rally for a third day, but most Middle East markets fell, resuming declines as regional political worries weighed.
Saudi Arabia’s Tadawul All-Share Index (TASI) climbed 3.27 percent to 5,950.74 points.
The sector activity for the day was mostly positive with 12 out of 15 closing with gains ranging from 0.06 percent by the Telecommunication & Information Technology sector and the Real Estate Development sector to 5.49 percent by the Banks & Financial Services sector.
On the other hand, the losing sectors for the day were the Media and Publishing, the Energy & Utilities and the Hotel & Tourism sector with 0.90 percent, 1.41 percent and 2.56 percent respectfully.
The overall market breadth for the day was positive with 87 advancers against 49 decliners giving it an AD ratio of 1.77, the Financial Transaction House (FTH) — approved by the Capital Market Authority — said in its daily market commentary.
The Saudi stock market turnover for the day reached SR4.52 billion.
Nonetheless, one prominent Saudi businessman has said he expects the Saudi stock index to return to normal if investors get rid of fear and stop selling their shares. Saudi Arabia has a strong economy, he pointed out.
“For certain we have a strength in our economy and investors selling their shares based solely on the news reports or analysts remarks concerning the region’s recent protests is wrong, Suleiman Al-Rajhi reportedly told Al-Eqtisadiah, a sister publication of Arab News on Sunday.
“The market will return to normal as we have no national side effect on our market due to the circumstances of other countries,” Al-Rajhi said, adding that currently all Saudi companies listed on the Saudi stock market have a solid financial standing backed by a strong national economy.
Commenting on investor’s concerns, Mohammed Al-Kuwaiz, managing director of Derayah Financial Investment Services, said he also believes that it is a good time to invest due to the increase in company profits, cleaner balance sheets of banks and government inflow from increased oil prices which all bode well for investment.
Al-Kuwaiz advised that investors should not panic and should not base investment decisions on emotion, but should invest wisely by putting their money in a diversified portfolio.
Mark Krombas, who has taken an overweight position in Saudi Arabia in his new Charlemagne Magna Middle East and North Africa (Mena) equity fund, said sharp falls in the Saudi stock market are a buying opportunity in key shares. These include the two largest Saudi stocks, SABIC and Al-Rajhi Bank, and Mobily, which are the fund’s three largest holdings.
Qatar rose 2.6 percent to 7,682 points on Monday, its largest gain in three months, on the first day’s trade following a long weekend.
Qatar stocks, along with those in other GCC markets, Reuters said.
Dubai’s index fell 1 percent to near Thursday’s six-year low of to 1,375 points, while Kuwait, Abu Dhabi and Oman also all slid. The Kuwaiti index dropped 0.9 percent to 6,135 points The Omani index fell 1.8 percent to 6,288 points.
The Bahraini index edged up 0.1 percent to 1,397 points.
Some analysts, meanwhile, say that the tide of political change sweeping the Arab world may also end up drawing in a fresh wave of foreign capital for the region.
Cashing in on state-held equity in publicly traded companies is an obvious way to boost foreign investment.
“It is clear that, following the current period of uncertainty, a number of the regional economies will have to reinvent themselves in the eyes of the foreign investors. Privatizations are historically an attractive way of bringing in new sources of capital. They can, moreover, serve as a way for regional governments to ease some of the fiscal constraints facing them at a time of transition,” said Jarmo T. Kotilaine, chief economist at the National Commercial Bank.
By bringing in foreign capital, companies can hope to draw on better know-how and other resources their narrow home focus might have deprived them of in the past. Moreover, privatization can serve as a way of improving transparency and governance standards. Privatizations at a time of transition are bound to be controversial, however, and governments should be careful to seek long-term partners whose commitment goes beyond a fair price, Kotilaine said.
Even though they may proceed more slowly than some of their regional peers, the GCC countries have every reason to revive their privatization programs. Better defining the government sector and more effectively focusing government expenditure will be important priorities going forward. In their absence, questions about fiscal sustainability will rise on the agenda as spending has increased dramatically during the crisis. Fortunately, the Gulf countries have numerous established precedents in involving the private sector through privatizations, concessions, PPPs, etc.
Such programs have an important role to play in reviving the private sector as the economies recover, he said.
“Moreover, after a period of uncertainty and a string of lackluster years, the GCC stock markets would doubtless benefit from some landmark privatizations,” Kotilaine added.
