GulfBase GCC Cap Indices
IndexLevelChg%
Large Cap3,936 0.03
Med Cap3,940 0.18
Small Cap5,130 0.19
Micro Cap8,623 0.05

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Ticker Price Volume
SIPCHEM 16.21 596,021
QNBK 147 369,995
SABIC 96.4 4,090,978
ALINMATOKIO 17.09 173,335
BKMB 0.38 5,415,834
DIB 5.53 648,652
SOCCO 61.73 6,226

Market Review and Outlook

Source: NCB Capital

Saudi Consumers Borrow Less, on Rising Prosperity & Regulations

The banks' portfolio of consumer and credit card loans has been shrinking every year since 2006 because of spreading prosperity. The volume of total consumer loans declined from SAR188 bn in Y06 to SAR183.4 bn in Y08 and further slipped 2.6% down to SAR183.2 bn in 1Q09 over 1Q08. The consumer loans as a proportion of banks' overall bank loans to the entire economy dwindled 13%, from 37.8% in 4Q06 to 24.8% in 1Q09. Continuing high profitability growth, increasing dividend disbursements by the corporate sector and hefty payroll enhancement by the government together have lessened consumers' borrowing appetite in recent years. Credit card loans accounted for 4.8% of the banks' total consumer loans, purchases of cars and equipment 20.6%, real estate 8.4% and the largest, 66.2%, concentrated in the pool of 'other' category. The Kingdom's average per capita consumer loans was SAR7,387 in Y08, about 10.4% of the overall GDP per capita, suggesting an adequate room for expansion. However SAMA's 2006 regulations, which stipulated that (1) only a third of the net salary can be used to repay the loan and (2) repayment should be complete within a 5 year time-frame, will keep the outlook for loan growth subdued.

Unemployment: Surprise to the Upside

Non-farm payrolls contracted by 247k in Jul, following a downwardly revised 443k drop in Jun. This marked the first marginal fall in the rate of joblessness since Dec07, causing the unemployment rate to edge lower to 9.4% from 9.5% in Jun. Job losses spanned across all sectors with only government (7k), health care & education (17k) and leisure & hospitality (9k) posting gains. In manufacturing, the pace of decline more than halved (-52k). This is largely due to the auto sector which added 28k workers, as Chrysler and GMC exit bankruptcy. Construction continued to shed labour (-76k), in line with the past 3 month average (-76k). The surprise to the upside in overall employment data is due to two factors: (1) the USD787 bn stimulus is beginning to feed through to the economy and spur recovery, and (2) some sectors have depleted their inventories, indicative that production will soon restart. These two factors will intensify in the near-term which could push growth in 2H09 higher than the 2.75% forecast. Although the US economy may be at a turning point, unemployment remains sizeable, having now declined consecutively for 19 months. This suggests that the labour market is likely to lag behind recovery.

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