4% petchem surge spurs Saudi market

28/01/2015 06:23 AST

The smooth transition in Saudi Arabia with Custodian of Two Holy Mosques King Salman ascending the throne is expected to have a positive impact on the local stock market in the coming weeks, say Saudi economists.

The market has perceived the recent developments in a positive light, they said.

“The pledge of allegiance by the royal family and other Saudi citizens to King Salman has given the Saudi economy huge confidence that cannot be seen in any other country when there is change in the top leadership,” Al-Subhi told Arab News.

His reaction came as the Tadawul All-Share Index (TASI) jumped 2.4 percent in the heaviest trade this month, as shares in petrochemicals giant Saudi Basic Industries Corp. (SABIC) surged 6.4 percent to SR84.

The petrochemical industries index rose nearly 4 percent.

John Sfakianakis of Ashmore Group commented: “The rally we saw was very much related to two important events: The smooth transition and the CMA stating that the market will open to foreigners as planned.”

4% petchem surge spurs Saudi market

Sfakianakis said: “Banks and petrochemical companies have been supporting this move and flow has been retail driven. TASI has broken above its recent trading range of 8,500 is now testing its 50-day average. All this has to be put in a larger context that King Salman pledged on Friday to maintain the Kingdom's current policies. The market has perceived all this in a positive light.”

Asad Khan, senior economist, Jadwa Investment, voiced optimism for the market’s future performance.

He said: “With oil prices set to rebound in the latter half of 2015 and strong foreign investor participation expected when the Tadawul opens up, at around the same time — together with the government committing to an expansionary budget — the outlook for the Tadawul is very positive.”

He added: “The massive drop in oil prices in the second half of 2014 negatively impacted investor sentiment and led to panic selling, which was not reflective of market fundamentals.” Citing reasons for growing investor confidence, Asad Khan said: “It is not surprising that as oil prices have stabilized at around $50 per barrel and an encouraging set of Q4, 2014 results have been reported.”

Banks also did well in the stock market on Tuesday after Kuwait's Global brokerage issued a bullish report on the Saudi banking sector on Monday, saying recent regulations restricting consumer-related fees would have only a short-term negative impact on banks' profitability.

Arab News