Tadawul recovery after KSA action reflects market confidence

30/03/2015 07:06 AST

The Kingdom’s stock exchange jumped the most in six weeks, leading a rally in Arab equity markets, after Custodian of the Two Holy Mosques King Salman pledged to restore stability in Yemen.

“The market has reacted positively to the swift and decisive Saudi-led airstrikes against Houthi military targets in Yemen,” Basil Al-Ghalayini, CEO of BMG Financial Group, told Arab News. The Tadawul All Share Index (TASI) added 1.88 percent on Sunday, the sharpest increase since Feb. 15 at the close. TASI closed 167.71 points higher at 9,071.2 points. The index is up 8.85 percent so far this year.

Al-Ghalayini also said that the united stand of Arab League leaders at the Sharm Al-Sheikh summit against Houthi aggression has restored confidence among investors.

Reacting to Sunday’s surge, Fawaz Alfawaz, Riyadh-based economic consultant, told Arab News: “The Saudi market reacted negatively until it was assured by the fact that the political situation was well managed and the security matter is completely under control.”

Alfawaz added: “That is the verdict not only by the Saudi market on Sunday but also earlier by the oil market which followed similar trajectory. It rose first to reflect perceived risk then once the it became apparent that the political situation was under control the oil price declined again.”

Francisco Quintana, head of research at Dubai-based Asiya Investments, commented: “The Yemen-related concerns will be temporary and will not affect the Saudi economy.”

He said: “The problem in the Tadawul is that the economy still relies on oil and in spite of the government’s efforts, the current level of prices weigh down on consumers and corporates. This will be reflected in this quarter’s earnings and the next quarter as well.

He added: “A positive factor for Saudi stocks might be the inclusion of the Tawadul into the emerging markets index, which was rumored to take place later this year. That could offset partially the impact of oil prices. However, it’s not confirmed yet and even if it happens, it will probably not make up for the negative factors affecting the region’s firms."

Most Middle East stock markets rose after brief sell-offs at the end of last week triggered by the escalation of military conflict in Yemen.

Dubai's index rose 0.9 percent. Qatar's bourse added 0.7 percent. Markets in Kuwait and Oman rebounded widely and rose 1.6 and 1.2 percent respectively after dipping at the end of last week. Egypt's market inched up 0.1 percent, Reuters reported.

It said that the main Saudi stock index climbed 1.9 percent, largely because of property developer Jabal Omar Development Company, which surged 5.8 percent. The company said on Thursday it had sold residential units worth SR70.1 million and would use the proceeds to fund further construction.

According to Reuters, Saudi Kayan Petrochemical Co. jumped 2.7 percent after it restarted its olefins plant in Jubail following an extended shutdown. Its parent company Saudi Basic Industries Co. (SABIC) gained 1.0 percent.

Meanwhile, Saudi International Petrochemical Co. (Sipchem) slipped 0.3 percent after the company said its affiliates would shut down two plants for maintenance.

Arab News