Saudi stocks hit 6-year high; index breaches 11,000-mark

The Tadawul All-Share Index (TASI), which has surged around 12 percent since regulators announced plans to liberalize the Saudi stock market for foreign investment, closed above the 11,000-point mark on Wednesday.
“The market continues to attract fresh liquidity which is positive for the uptrend in the medium term,” commented John Sfakianakis, a Riyadh-based investment strategist.
“Reaching 11,500 is an important level which should be reached later this year,” he told Arab News.
Expectations of strong global demand for petrochemicals supported the uptrend the Saudi Arabia's stock market on Wednesday, lifting the bourse to a fresh six-year high. TASI closed at 11,029.95, up 90.11 points or 0.82 percent.
The index is up 29.22 percent so far this year.
“I expect there will be volatility in the Saudi stock market in the remaining part of the year," commented Said Al-Shaikh, chief economist at the National Commercial Bank (NCB).
“I don't think the index will continue to rise indefinitely. But I think there will be some correction and profit-taking throughout this period until the end of the year,” Al-Shaikh said.
He made these remarks on the sidelines of the launch of the third quarter NCB and Dun & Bradstreet Business Optimism Index (BOI) report in Jeddah.
Al-Shaikh added: "Last year, the Tadawul index was up 25 percent due to economic fundamentals and developments in the global economy. The Dow index was up 29 percent. So, it was not a surprise that TASI surged 25 percent in 2013."
Commenting further on the latest market developments, Sfakianakis added: “The next earnings cycle will determine what levels it tests and how quickly.”
He said the petrochemical sector, which rose 1.84 percent on Wednesday, has been a recent favorite after certain banks have seen a renewed rally.
“The upswing has been happening on the back of few corporate news and as oil has been treading lower,” he said.
“The view of local investors seems to be geared by momentum that seems to be gaining pace as news of the opening up of the market is still the main reason for the bullish trend.”
Asad Khan, senior economist at Jadwa Investment, commented: “We expect the TASI to keep trending upward, with the prospect of opening the stock market still buoying investors’ confidence. In addition, recent positive economic data from the US has added to optimism surrounding the global economy, with the petrochemical stocks, in particular, benefiting.”
Asad Khan added: “We are likely to see a period of oil price stability, with the Brent benchmark not deviating too drastically from around $100. At this level, oil prices are not likely to inhibit the upward momentum seen in the Tadawul during the last month.”
Asked about Tadawul’s future direction, he said: “Although it’s difficult to say exactly, looking at the general positive investor sentiment combined with the favorable domestic macro-economic climate, and improving global economic environment, it’s not beyond the realms of possibility that the TASI exceeds the 12,000 mark within the next 3 to 6 months, all other things being equal.”
According to reports, petrochemicals were among the main drivers on Wednesday.
Saudi Basic Industries rose 1.2 percent, Saudi International Petrochemical Co. (Sipchem) jumped 4.7 percent and Saudi Kayan Petrochemical Co added 2.5 percent.
A number of Saudi banking stocks, which had posted strong gains over the last few weeks, pulled back on Wednesday. Banque Saudi Fransi fell 1.9 percent, Samba Financial Group edged down 1.1 percent and Saudi British Bank was down 1.4 percent, Reuters reported.
The powerful trading waves on Wednesday expanded Tadawul’s volume to 493.5 million shares, an increase of 109.4 percent over the 50-day average of 235.7 million shares.