Saudi market buoyed by high oil income, fiscal surplus

A surge in Saudi Arabia’s oil revenue and expectations its budget would record a massive surplus have allied with strong corporate performance to give a push to the Gulf kingdom’s bourse in the fourth quarter.

After a turbulent period through 2011, the Riyadh-based Tadawul bourse has climbed by nearly 3.6 per cent by the end of last week since the start of the fourth quarter of 2011, National Commercial Bank (NCB) said.

“Expectations of huge oil revenues and a relatively sizable budget surplus have comforted investors lately and the appetite for riskier assets increased,” the country’s largest bank said in its weekly report sent to ‘Emirates24|7’.

“The strong performance is mainly driven by expectations of the budget announcement and strong corporate profitability across sectors which is expected to carry forward into 2012.”

NCB said it expected corporate earnings to rise further in the coming period, adding that prices indicate an opportunity for investors as the market PE ratio is currently at 12.2 compared to 15.28 for 2010.

As a result, daily trading volumes at Tadawul, the Middle East’s largest and busiest stock market, have averaged SR5.2 billion since September against 2011’s average of SR4.4 billion, it said.

“The economy has proved resilient to external shocks and is undergoing huge spending plans…...this should be reflected on stock prices and investors have become more confident in the market,” the report said.

“However, speculation is still present and driving many overweight stocks higher. The concentration on fundamental performance indicators is lacking in a very promising market that has swung back on track and is positioned to grow,” it added, noting that the index has lost around 4.4 per cent year-to-date at the closing of last week mainly due to external factors.

“The budget announcement will assure investors on the Saudi economy and attract more capital over the short-term.”

Buoyed by strong oil prices, Saudi Arabia on Monday announced the largest budget in its history at SR690bn for 2012.
 

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