Saudi bourse poised for surge

Rise will flow 7.7% decline in first nine months despite high oil prices

Saudi Arabia’s bourse, by far the largest in the Middle East, is expected to sharply rebound this year after a decline of nearly 7.7 per cent in the first nine months, the Gulf Kingdom’s largest bank said on Tuesday.

The decline was a result of worries by local equity investors because of the global financial turmoil although the domestic economy is growing fast and the kingdom is poised for massive financial surpluses, National Commercial Bank (NCB) said in its weekly report, sent to 'Emirates24|7'.

It said investors in the Saudi bourse, Tadawul, which accounts for nearly a third of the total Arab market capitalization, are anticipating third quarter results and are “anxious to shift their funds towards stronger stocks.”

The report showed Tadawul has managed to remain above the 6,000 level during September, with the index closing at 6,112.37 last week, marking a 0.5 per cent loss over the 4-day trading week due to national day celebrations. 

“The index has lost 7.7 per cent as of last week since the beginning of 2011 which is a conflicting reflection of the economy,” it said.
“Saudi oil production has been raised to accommodate shortages from Libya… coupled with elevated oil prices; the Saudi economy is set for huge budget surpluses. 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.”

Fundamentally, the report added, Saudi stocks are poised for gains as their corporate profitability has been on the rise so far and are expected to record gains during the remainder of the year.  Moreover, daily trading volumes have started to pick up and reached a three month peak at SR5.5 billion last week. 

During this year, trading volumes have averaged at SR4.2 billion, almost 36 per cent higher than 2010’s average daily trading.  “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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