This image taken December 12, 2019 reveals a view of the indication revealing the logo design of Saudi Arabia’s Stock Exchange Market (Tadawul) bourse in the capital Riyadh.
FAYEZ NURELDINE|AFP|Getty Images
Saudi Arabia’s benchmark index is holding constant at 15- year highs, regardless of breaking a 10- day winning streak on Sunday.
The Tadawul All Share Index fell 1.23% on Sunday and was down 0.76% on Monday to trade at 12,04704 Saudi riyals by midday London time, however is still up around 7% given that the start of the year.
“Sentiment in Saudi Arabia is bullish due to brisk economic activity, sequential gains in corporate profits, lucrative IPO activity, a strong real estate market, and very high oil prices,” stated Tarek Fadlallah, president of Nomura Asset Management, Middle East.
The kingdom is the world’s second-largest manufacturer of oil and its oil giant Aramco reported an earnings of $304 billion for the 3rd quarter of 2021 as the international economy resumed and energy costs skyrocketed.
“While the Saudi economy is in the process of diversification, the importance of oil, which account for around three-quarters of exports, cannot be understated,” Fadlallah informed CNBC.
Mazen al-Sudairi, head of research study at monetary services business Al Rajhi Capital, echoed that view, calling oil the “main driver” of Saudi Arabia’s stock exchange. He stated crucial sectors in the kingdom count on oil both straight and indirectly.
Oil costs have actually increased more than 60% in the last 12 months as need has actually rebounded, and struck a seven-year high recently after an attack on Abu Dhabi declared by Yemen’s Houthi militants.
“The current backdrop remains supportive for share price performance,” stated Ehsan Khoman, head of emerging marketing researches EMEA at MUFG Bank.
Specifically, petrochemical business with the benefit of low expenses and high operating performances might acquire substantially, he included.
Tailwinds for markets
Market watchers likewise stated the Saudi market is most likely to gain from increasing rate of interest, with the success of banks, among the marketplace’s crucial sectors, set to enhance.
“Higher oil costs and greater rates are favorable for [Gulf Cooperation Council] banks through greater credit development, reinforcing liquidity and enhanced property quality along with expense of financing,” stated Khoman.
He likewise stated customer retail companies in the Gulf stand to benefit since customer self-confidence is extremely associated with oil costs, which will serve as a driver for discretionary costs.
Additionally, numerous financiers are underweight Saudi stocks, and some might select to purchase more strongly, driving the stock exchange greater, Nomura’s Fadlallah stated.
However, he does not anticipate the Tadawul All Shares Index to strike brand-new records in the future.
“Although the TASI has broken up above its 15-year trading range, the all-time highs … are a long way away and unlikely to be challenged anytime soon,” he stated.
The index hit 20,62484 in February 2006, according to information from Refinitiv.
IPO ‘gold mine’
Separately, the competitors for going publics in the Middle East is “one healthy thing” taking place in the area’s markets, stated Fadi Arbid, primary financial investment officer at Amwal Capital Partners.
“There is a bit of a bonanza, but it’s a healthy one because some of these markets have been thin,” he informed CNBC’s “Capital Connection” recently.
He stated Saudi Arabia has a benefit over other states offered its greater market capitalizations, typical trade volumes and the variety of IPOs, however “others are also catching up,” he stated.
