JEDDAH, 5 December 2007 — The Saudi stock market continued its upward march and it looks as if the Tadawul All-Share Index (TASI) will cross the 10,000 mark by the end of the year. The index closed yesterday 61.54 points higher at 9,778.98 after surging over 186 points or 1.96 percent on Monday. “As we approach the end of 2007, we are still in favor of our bullish stance on the Saudi stock market,” the National commercial Bank (NCB) said in its latest Market Review and Outlook report. The NCB report said the market is also trading within a narrow range on the upcoming Haj holidays, expected announcement of the 2008 state budget, and worries on oil price volatility. However, there are a number of factors that will probably keep the market on a bull chase.
First, the P/E multiple was 15.12x on Dec. 1, giving a 6.6 percent dividend yield that is higher than the 4.25 percent SIBOR rate. Secondly, the market still has upside potential, as the price to book ratio was only 3.6 last week, significantly lower than its all time-high of 13 in February last year.
Finally, ongoing structural and financial sector reforms are expected to increase capital flows to the stock market. In particular, the market capitalization has already reached SR1.60 trillion at the end of November, which is about 122 percent of nominal GDP in 2006.
Saleh Al-Thaqfi, a financial consultant, said, “The Saudi stock market is currently striving to muster fresh strength as evidenced by the upward momentum achieved recently. The market has been able to attract more conventional investment liquidity. This behavior of the market also strongly indicated the market is distancing itself from any likelihood of the repeating of the heavy crashes as happened last year.” According to Al-Thaqfi the Saudi economy has reached a point of bloom in liquidity. “Most governmental establishments have achieved excellent financial strength and purchasing power even after the repayment of their debts,” the expert said. He underscored the capability of the Saudi stock market to attract investment liquidity particularly after the strength of riyal has been evident during this time.
The strength of the riyal will also prompt investors to the Saudi stock market. He observed that all these factors strengthened the capability of the market to weather all the expected corrective measures.
Saleh Al-Sudairi, a technical analyst said, the general index was still moving in its past orbit, and had not achieved any new notable direction from a technical standpoint, despite positive movements this week. He also stressed the need for Saudi Basic Industries Corp. (SABIC) shares to pass the resistance level beyond SR170. SABIC shares, however, fell slightly yesterday to close at SR168.50.
In the banking sector, shares of Saudi Hollandi bank, Banque Saudi Fransi and SABB declined yesterday.
Malath Cooperative Insurance and Reinsurance Company was the top gainer as its shares jumped 9.90 percent to SR169.25 yesterday. Shares of the newly-listed Jabal Omar Development Company also surged 9.87 percent to SR22.25.
Zamil Industrial Investment Co. shares dropped 4.79 percent to SR99.25 and Kingdom Holding Co. by 4.16 percent to SR11.50.
In the telecom sector, shares of Saudi Telecom Co. (STC) increased by 2.31 percent to SR77.50 while Etihad Etisalat shares closed unchanged at SR71.50.
There was an increase in the daily stock market turnover. Yesterday SR13.42 billion worth of shares changed hands compared to SR12.19 billion on Monday.
