Saudi market to rebound despite global pressure

Saudi Arabia’s bourse, the largest and busiest stock market in the Middle East, declined by over two per cent last week as investors remain wary about the European debt crisis but it is expected to recover by the end of 2011, the Gulf Kingdom’s largest bank said on Tuesday.

Following gains for five consecutive weeks, Tadawul market receded by about 2.2 per cent on a weekly basis on Wednesday’s closing , National Commercial Bank (NCB) said in its weekly bulletin.

As of last week, the index has lost nearly 8.1 per cent since the beginning of 2011, the report showed. But it added that, disregarding external factors, stocks are fundamentally strong and are poised for exceptional gains.

It noted that corporate earnings are on the rise and prices indicate an opportunity for investors as the market PE ratio reached 11.78 in October compared to 15.28 for 2010. Average daily traded volumes have been on the rise, since September, standing at around SR5.09 billion, 18.4 per cent higher than the YTD average. Furthermore, the Saudi economy is expected to expand at six per cent this year driven by robust revenues, the report said.

“The economy has proved resilient to external shocks and is undergoing huge spending plans. This should be reflected on stock prices but investors seem wary of the global sentiment,” it said.

“The European debt crisis has pushed investors to seek safe havens as the US economy also faces some challenges to find USD1.2 trillion worth of spending cuts. We expect the Tadawul index to reach closer to 6,500 by the end of 2011 as fundamental growth reassures investors’ sentiment.”

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