Saudi Arabia’s stock market, the largest and busiest in the Middle East, has remained lackluster in defiance of surging oil prices and the resulting momentum in the Gulf country’s economy, a key bank said on Wednesday.
Booming oil prices allied with higher crude output by Saudi Arabia to give a fresh impetus to the Arab world’s largest economy while higher public revenue and spending have led to better corporate performance in the Kingdom, National Commercial Bank (NCB) said in a study sent to Emirates 24/7.
“As a result, relevant stock prices should gain as future outlooks flourish. However, theory does not always mirror the practical side as proven by Saudi’s main stock market index, Tadawul All-Share Index (TASI),” it said.
“After the political worries during March, TASI regained its losses but never managed to climb more than two per cent since the beginning of 2011.”
As oil prices remain elevated above $100 a barrel coupled with increased Saudi oil production and announcements of huge spending plans, TASI refuses to climb any further and, in fact, dropped to the negative region by losing almost two per cent YTD as of last week, the study said.
It noted that the economic stimulants have helped listed companies record massive profits in the first half of this year.
SABIC recorded SR15.8 billion during 2011’s first half, an impressive 51 per cent increase over the same period last year. Moreover, Saudi Electricity Company reported a whopping 96 per cent gain in profits over the same period and Saudi Banks managed to gain a more modest 8.5 per cent.
“The strong fundamental indicators only suggest an upward trajectory while TASI remains resilient and variant to growth as seen by the weakest daily traded volume at SR2.32 billion since November 2010,” NCB said. “We still expect TASI to end 2010 with at least a 10% gain albeit at a very slow momentum.”
Tadawul is by far the largest Arab stock market by capitalization, which stood at around $347 billion on July 24, nearly 37 per cent of the total Arab market capitalization of nearly $928 billion.
The market has 147 listed companies, with their turnover reaching $729 billion on that date, accounting for nearly 85 per cent of the total value of shares traded in the Arab region’s 15 stock exchanges.