Saudi succession, positive Q4 results may lift Gulf

26/01/2015 12:31 AST

Saudi Arabia's swift transition of power may boost the kingdom's stock market on Monday, although analysts' views differ on potential economic policy adjustments; positive earnings reports may support other Gulf markets.

After the death of King Abdullah at the weekend, his successor King Salman pledged continuity in energy and foreign policies and appointed younger men as his heirs, settling the succession issue for years to come.

Some analysts think the Saudi succession could benefit the stock market because King Salman will face pressure to ensure public support with state sector wage increases and other populist steps that could accelerate the consumer spending boom. Investment bank Exotix said there could be measures "to renew the social contract" in the form of more state spending on welfare, infrastructure, defence and overseas aid.

Stocks benefiting from this would include consumer-oriented firms Jarir Marketing, United Electronics Co and Fawaz Alhokair Co, as well as banks such as Al Rajhi if they are permitted by regulators to loosen consumer credit, Exotix said.

Other analysts and businessmen don't expect such lavish stimulus at a time of low oil prices and budget deficits, however. The Saudi 2015 budget, which Salman is believed to have signed off on last month as one of the top leaders running the economy, contained only a marginal increase in nominal spending and a small decrease in inflation-adjusted spending, and pledged to "rationalise" spending on wages.

The kingdom's market was closed on Sunday following King Abdullah's death, along with bourses in Bahrain, Kuwait and Oman.

Elsewhere in the Gulf, Abu Dhabi Commercial Bank may lift the emirate's bourse after it reported a 16 percent jump in fourth-quarter net profit late on Sunday.

The fourth-largest lender by assets in the United Arab Emirates made a net profit of 1.02 billion dirhams ($278 million) in the quarter, while analysts had forecast it at 920.7 million dirhams.

Another local lender, Abu Dhabi Islamic Bank, reported results that were broadly in line with estimates and proposed a nearly flat dividend payout.

Qatar Electricity and Water Co (QEWC), the Gulf state's monopoly utility firm, may gain on strong profit growth. The company made a profit of 360.5 million riyals ($99 million) in the fourth quarter according to Reuters calculations; EFG Hermes expected a profit of 331.5 million riyals, while QNB Financial Services forecast 321.7 million riyals.

QEWC has also proposed paying a cash dividend for 2014 of 75 percent, according to a local press report citing a company statement, equivalent to 7.5 riyals per share. This would be above the 6.82 riyals the company paid in 2013, according to Thomson Reuters data.

The global background is slightly negative after the leftist Syriza party swept to victory in a snap election in Greece, prompting fears of renewed instability in Europe.

Reuters