Saudi stocks: ‘Volumes to continue upward movement’

04/12/2016 07:04 AST

Positive sentiment from October’s international bond sale and a recommencement of payments to contractors by the government, have pushed the gains of Tadawul All-Share Index (TASI) to 2.3 percent so far this year.

The index closed 1.34 percent higher on Thursday at 7,093.66 points. The Saudi stock market, which resumes trading on Sunday after a two-day break, was up by 16 percent month-on-month in November. This was the largest monthly rise since April 2009, economists from Jadwa Investment said in a recent report.

On Wednesday, the last trading day of November, TASI gained 103.35 points or 1.5 percent to close at 7,000.18. Wednesday’s decision by oil exporters to cut oil output to rein in a global glut also boosted investor sentiment.

“Going forward, TASI’s performance is likely to be influenced by expectations around the Saudi budget, which is usually released at the end of December,” the economists said in Jadwa’s December Chartbook.

It said that the market’s turnover reflected increased investor activity by edging up in November, which led to market turnover recovering close to the year-to-date average in most sectors. This comes in response to the Kingdom’s sovereign bond success last month. “We expect volumes to continue their upward movement in December,” said the Jadwa economists.

November’s rise in TASI’s monthly performance was accompanied by an improvement in traded volumes as average daily turnover reached a four-month high for most sectors. According to the report, TASI’s strengthening monthly performance was mirrored in the benchmark’s marginal price-to-earnings (PE) increase. This marks a 2016 high, and the closest it has trended to the two-year average since September 2015.

TASI’s PE remains competitive against emerging markets and in line with regional counterparts, the Jadwa economists pointed out.

PE continued to edge upwards in November to 16.47, but still trends below the two-year average of 17.33 making it more in line with emerging markets although the benchmark’s dividend yield is slightly lagging behind regional averages, the chartbook added.

It said that all 15 sectors were up in November in line with TASI. Sector performance could become more differentiated in December as the Saudi budget is released with allocations for certain segments having a knock-on effect on each sector.

The net income of listed companies totaled SR28.3 billion ($7.55 billion) in the third quarter of 2016. Year-on-year growth was virtually flat, rising by 1 percent, while quarter-on-quarter net-income rose by 3 percent, the report said.

It said the banking sector remains the largest contributor to the net income of listed companies. The energy sector saw the largest year-on-year rise in net income, perhaps due to higher electricity tariffs which took effect from the beginning of 2016.

According to the report, new data on the monthly value of oil exports showed Saudi Arabia earning $96 billion year-to-September in oil export revenue, compared with $128 billion during the same period in 2015.

Arab News