Saudi stock market to keep upward trajectory

02/10/2014 01:25 AST

The Saudi stock market is expected to continue to move upwards up until 1H2014 when foreign investors start their trading, the Saudi Commercial Bank said in its latest Saudi Economic Review.

The GCC region has outperformed their peers as the MSCI GCC index registered a growth of 25 percent YTD by mid- September.

The Saudi stock market recorded the highest growth last month at 8.8 percent, followed by Qatar and Dubai’s indices at 5.6 percent and 4.6 percent, respectively.

The global equity outlook for 2014 is likely to end positively given there are no major setbacks affecting investors’ incentives.

By the end of last month, only the media and publishing sector posted a YTD decline of 0.1 percent. The remaining sectors posted significant double-digit growth rates, from 17.0 percent to real estate at 53.0 percent YTD.

Quarterly corporate profitability announcements will commence following the Hajj break and the general outlook is strongly positive as business activity has picked up on the back of a growing economy.

Given the liquid state of the economy, Tadawul might near the 12’000 level by the end of the year. The bullish movement of stock prices supported activity levels as average daily traded volumes peaked on August 25 at SR16.1 billion to support the monthly average that reached SR9.9 billion, a substantial 45.6 percent rise over the previous month.

In comparison to the same month last year, the number of transactions rose by 79.5 percent while market capitalization increased 46.3 percent to reach SR2.26 trillion by the end of August.

Saudi investors identified the lucrative opportunity to enter the market before foreign institutions inject up to an expected $60 billion into the market. Saudis traded 94.3 percent of July’s total value while they increased their activity to 96.1 percent last month.

However, the rise of stock prices decreased valuations as the trailing price-to-earnings ratio rose to 18.23 last month, up from 16.95 during July. Additionally, the primary market remained non-active during August and September, but it is expected to register some activity in the fourth quarter on the back of a vibrant secondary market.

Domestically, the index was heavily boosted by the recent decision to open the market to foreign institutions.

Tadawul broke the 11’000 level last month, reaching 11’149.36 on September 9th, a level unseen since January 2008. The market has experienced some hesitance and investors opted for capital gains, which derailed the trajectory of the market as it currently fluctuates just above 11’000. Earlier in 2014, it was expected that equity markets on a global scale would moderate on the back of strong performances in 2013.

However, nearing the end of the third quarter, indices continue to reach new highs and record significant growth levels.

Based on the MSCI World index, markets registered a 2.0 percent growth last month, withstanding concerns relating to the Russian-Ukrainian standoff and an expanding ISIL threat.

In the US, the Dow and the S&P500 have recorded new highs above 17’000 and 2’000, respectively. Markets received a boost with a clear statement from the Fed expressing its intentions to maintain an accommodative stance following the end of QE3 next month.

In Europe, the 18- nation currency bloc is finding difficulty in sustaining a notable recovery. Yet, markets have been undeterred as the STOXX600 posted a 1.8 percent rise in August.

Saudi Gazette