Saudi stock investors urged to stop speculation

Investors in Saudi Arabia’s stock market, the largest in the Middle East, should halt their speculative activities to support the bourse and ensure normal growth based on good corporate performance, the country’s largest bank said.

National Commercial Bank (NCB) said Tadawul All Share Index (TASI), Saudi Arabia’s main equity index has stagnated and is facing a strong resistance level.

Citing market figures, it said that during post-regional political outbursts, the index has peaked at end of April at 6,724 and has been hovering around 6,700.

As of last week, TASI gained only around one percent year to date, although it climbed a long way from its negative 19.6 percent bottom this year.

During the month of May, average daily traded values have reached SR5.5 million, a strong indication investors are willing to delve into riskier assets, NCB said in a study sent to Emirates 24/7.

But it added that TASI remains “plagued with market speculators and that the herding mentality remains the main catalyst for bullish or bearish trajectories.”

Fundamentally, stocks are poised to grow as corporate earnings provide a promising outlook for 2011, the study said.

The main sectors pulling up the index are Industrial Investment, Petrochemicals, “While heavy-weights, such as Telecommunication and Banking sectors, are lagging behind with 8.8 and 0.5 percent YTD losses respectively,” it said.

“Amid strong performances by companies, we expect stock prices to push through and reach levels above 7,000 within the next six months.

However, investors must abandon their speculative behavior and focus on fundamentally strong stocks in order to avoid strong fluctuations in the market.”