Higher profits lift Saudi bourse by 2.5%

Higher corporate earnings lifted Saudi Arabia’s stock market by around 2.5 per cent in the first 17 days of 2011 and the bourse is projected to perform well through the year, the Gulf Kingdom’s largest bank said on Tuesday.

The All Shares Index tracking the country’s Tadawul bourse, the largest and most speculative market in the Middle East, closed at 6,788.42 points on Monday, gaining 167.7 points during the period, National Commercial Bank (NCB) said in a study sent to Emirates 24/7.

“Early indications from the upcoming 2010 corporate results suggest that Saudi listed firms were on track for positive earnings growth despite global economic slowdown and subdued investors confidence in the home equity market,” it said.

“We expect 2011 to be a promising year for the Saudi index as the global situation improves and individual investors downplay international concerns that impacted their investment decisions last year.”

The report said the market, which accounts for nearly a third of the Arab capitalization, rose on higher volume and better dividend payouts expectation this year. “The market fundamentals are supportive with earnings multiple of 15.5 PE, price-to-book-value of 2.1 times and an earnings per share of SR1.85.”

With 12-months total trailing net-profit of SR73.2 billion in 2010, the net earnings yield was 6.45 per cent in 2010, more than three times higher than the prevailing profit rates offered by domestic banks on time/savings deposits, it said.

“The financial sector has been in the spotlight this year, gaining 1.85 per cent at yesterday’s closing. The better-than-expected earnings are pushing banks’ stocks higher, yet only four banks announced their earnings last week.”

According to the study, the Saudi equity market offers relatively “attractive returns” on investment in the medium to long-term.

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