Saudi stock markets defy Moody’s cut

16/05/2016 05:15 AST

Saudi Arabian stock investors showed they care more about the price of oil than what New York-based Moody’s Investors Service thinks about the kingdom’s debt dynamics.

A day after Moody’s became the latest company to reduce the nation’s credit rating, the Tadawul All Share Index added as much as 0.8 per cent before closing little changed.

Saudi Arabian Mining, known as Maaden, helped shore up stocks with a 3.8 per cent gain. “Oil prices have stabilised, with Brent around $47,” said Muhammad Faisal Potrik, the head of research at Riyad Capital.”That’s good for the markets.

People have largely ignored the Moody’s downgrade news as it was expected.” Brent crude rose more than 5 per cent in the week ending Friday, bringing its increase since a 2003-low in January to 72 per cent.

Still, Saudi Arabia is pushing ahead with efforts to diversify its economy away from oil, with investors speculating that Maaden will become more profitable as the kingdom seeks to boost its mining industry.

The Saudi Public Investment Fund replaced its representatives on the board and named Aramco’s Khalid Al Falih as chairman last month.

Al Falih was also named oil minister about a week ago. Maaden shares

Traders exchanged almost 7 million Maaden shares, about twice the average in the past 20 days. The stock’s 14-day relative strength index rose to 78; a level above 70 is a sign to some analysts that a company has risen too fast and is poised to reverse.

As part of its strategy for the post-oil era, Saudi Arabia in the coming weeks plans to unveil a National Transformation Program that will focus on ways to boost economic growth, create jobs, attract investors and hold government offices more accountable.

The programme “will include more details of the plan to transform their economy,” said Tariq Qaqish, the Dubai-based head of asset management at Al Mal Capital.”The market has been driven recently by news, and Saudi is hitting the wires more and more for good reasons.”

The Tadawul has gained five of the past six weeks, with companies on the gauge trading at about 13.2 times expected earnings in the next 12 months, near the most expensive since August. Orascom Telecom Media & Technology, the investment vehicle of billionaire Naguib Sawiris, fell 2.8 per cent.

The company said on Thursday it agreed with Commercial International Bank on a fourth postponement of a deal to buy the latter’s investment banking unit CI Capital, which was due to be concluded at the end of March.

The Gulf Today