Oil prices boost Saudi market

Saudi Arabia’s bourse, the largest and busiest in the Middle East, is expected to remain strong because of high oil prices despite political unrest in the Middle East and North Africa and Greece’s financial crisis.

Although the bourse index dropped last week, the market remains fundamentally sound and would be bolstered by an expected rise in corporate profitability, according to National Commercial Bank (NCB), the Gulf Kingdom’s largest bank.

It said the worrying situation surrounding stocks around the globe intensified as Greece continues to create discomfort for investors worldwide.

Global economic growth is at risk as a possibility of Euro sovereign default will drag down economies in a “domino” effect, NCB said in a study.

Furthermore, the political unrest in the MENA region refrains to be resolved as Libya and Syria cases worsen, it said.

Its figures showed such developments had pressured Saudi stocks and the main index dropped to 6,546.06 last week, a 1.1 per cent decline so far this year.

The index peaked at 6,754.82 after King Abdullah’s recent decrees on massive financial benefits for Saudis, the study said, describing the increase as an impressive feat considering the climb from 5,232.27 in March.

Fundamentally, stocks remain strong with corporate earnings in the second quarter expected to remain high on the back of elevated commodity price levels over the past few months, the report said.

It showed that last week, values averaged SR4.1 billion. Although low compared to this year’s SR4.7 billion average, it is over 32 per cent above 2010’s average of SR3.1 billion. The study noted that the drop in stock prices has created an attractive opportunity for investors as the market’s PE ratio stands at around 13.7 and 1.9 for the market’s P/B value.

“The Saudi economy is set to record unprecedented revenues which will trickle down to the private sector thus boosting corporate profitability, consequently pulling up stock prices.”

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