The Saudi Arabian stock market, or Tadawul, surged 4.6 per cent to 5,023.22 yesterday as investors greeted the new year with renewed optimism after suffering a 57 per cent crash in 2008.
It was a good day for virtually all the stocks, with petrochemicals and banking shares heavily traded despite concerns over the slumping prices of petrochemicals and steel globally and the problems plaguing the kingdom's financial companies.
The Tadawul All Share Index advanced for a fifth day, the biggest increase since November 29.
"There is a feeling that banks here are liquid and some investors are taking positions in the new year based on low valuations," a Riyadh-based broker said.
Shares in Saudi Arabia, the Middle East's largest economy, plummeted last year along with other Gulf bourses amid concern that the region's oil dependent economies will be hit hard by the international economic downturn.
Investors have been reassured by the government's commitment to maintain spending despite weakening oil prices. The Saudi government is planning to spend a record SAR225 billion (Dh220.25bn) this year on infrastructure and other strategic industrial projects and risk running a deficit in order to prop up growth.
Fourth-quarter earnings, which are due in the next few weeks, may give investors a better indication of how the region is coping with the current economic climate. Late last week, an announcement by Saudi Kayan Petrochemical Company confirmed that the Saudi government is prepared to support critical projects that wean the economy off oil, even as the kingdom faces lower revenues from crude and budget deficits.
Kayan, an affiliate of Saudi Basic Industries Corporation, or Sabic, rose 4.10 per cent to SAR10.10 after disclosing it has secured a SAR2bn loan from a government fund. The loan completes its $6bn funding needs to finance a portion of its new petrochemical complex in the Jubail industrial city.
But with crude oil prices remaining well below Riyadh's desired target of $75 and the Organisation of Petroleum Exporting Countries' inability to control supply, few believe the losses of 2008 will be recouped quickly.
While activity on the Tadawul "was back to normal [yesterday]", the broker said, investors will remain jittery if the gains cannot be sustained when other Gulf markets open.
Saudi Basic, the kingdom's largest exporter of petrochemicals, surged the most since December 12, climbing 9.2 per cent to SR56.25. Al Rajhi Bank, the biggest Islamic lender in the country, advanced as much as 6.3 per cent, closing 4.5 per cent higher at SR58.5.
Saudi Arabia's stocks dropped last year after oil prices fell more than 50 per cent and the global financial crisis curtailed companies' operations in the Arab world's largest economy. Saudi Arabia relies on its oil revenue to fuel growth even as the government tries to diversify its economy and increase employment by building industrial cities, such as the $120bn King Abdullah Economic City.
"Investors are waiting for the annual financial statements release to know for sure the degree of the impact of the financial crisis on the local market, especially that for the banking and financial services and on the petrochemical industry sectors," Bakheet Investment Group said in a December 31 weekly market report.