Stock markets in Saudi Arabia are set to experience further gains next year after they have outperformed most of the markets in the Gulf for 2010. Firms riding on higher oil prices, a record high budget and worldwide economic recovery have driven the gains according to both investors and analysts.
The largest bourse in the Arab world rose around 8 percent for 2010, causing investors to expect further gains for 2011 with the price of oil hovering at $90 per barrel. Saudi, the largest Opec exporter, is introducing a $400 billion stimulus package, the most substantial stimulus in the world relative to GDP.
Earlier this week Saudi stated that $155 billion was marked for spending in 2011, much of that amount is to be spent on infrastructure and education.
According to a chief executive for Bourse Experts, Youssef Kassantini, the main benchmark may reach 7,000 points over the next two months. Kassantini cited a correlation in the stock market of around 74 percent with the price of oil. Wednesday’s close hit 6,610.
Kassantini spoke to TradeArabia and stated that the investment climate was assisting Saudi in planning for a record budget. He also noted that the planned expenditures would likely act as a vehicle to TASI.
The benchmark in the Saudi stock market is moving towards the 7000 to 7100 range for the opening quarter of 2011, stated chief technical analyst for EFG-Hermes Mohamed El Aasar, also speaking to TradeArabia. Aasar noted that the benchmark may top 9000 by the close of next year.
Kassantini said that the stock market in the Kingdom is in a good position to reap large gains mainly from the banks, the telecom firms and petrochemical markets. He stated that the market will be in good shape for next year.
Although the banking index has climbed 5 percent, certain bank shares have remained less expensive than other Gulf peers.
Riyad Bank for instance, has a PE ratio (price-to-earnings) of 13.4. Samba Financial Group is seeing trading at 12.3 times the earnings for 2010 based on figures by Thomas Reuters. The National Bank of Kuwait has a price-to-earnings ratio of 15.9.
Financial analyst Turki Fadaak stated that as the banking industry recovers the Saudi index will see even better gains through 2011. Fadaak, who is also a Saudi Economic Association member, noted that the bank sector will enjoy investor action throughout 2011.
Saudi’s banking index closed at 16,524 on Wednesday and is expected to reach 16,900 during the opening quarter of 2011. Aasar stated that the index should experience a 10 percent gain by the close of next year.
As the price of oil is likely to remain high, the petrochemical industry will be steady and strong through 2011, according to analysts. The petrochemical index shot up 21 percent in 2010 and analysts say it could rise by 25 to 30 percent in 2011. The largest stock on that index is Saudi Basic Industries Corp (known as Sabic) and the index closed at 6,506 on Wednesday.
Aasar forecasts that the petrochemical index will sit at 6,720 points for the opening quarter and reach 8,400 to 8,500 points at the close of 2011.Paul Holdsworth, Staff Writer, Gulf Jobs Market News