Foreign Investment Plan May Lift Saudi Market

Saudi Arabia’s stock market may rise on Sunday after the regulator said it would open the bourse to direct foreign investment from June 15. Strong oil prices may also support investor sentiment across the Gulf.

The kingdom announced last July that it would permit direct foreign purchases of shares in the first half of 2015, as a way to expose companies to market discipline, diversify the economy beyond oil and create jobs.

The Capital Market Authority announced after the close on Thursday that qualified foreign institutions would be able buy shares from mid-June and the final rules covering this would be published on May 4. Up to now, foreigners have been restricted to buying Saudi shares indirectly through swaps or exchange-traded funds.

Fresh fund flows into Saudi Arabia in the initial months may be moderate – perhaps only hundreds of millions of dollars a month – partly because share valuations are currently quite high. But the announcement may nevertheless buoy sentiment, while the market opening is likely to start the process of incorporating Saudi Arabia into major equity indexes such as those run by MSCI, which will eventually attract tens of billions of dollars.

The Saudi stock index, last at 9,251 points, faces minor technical resistance at the late March high of 9,377 points and major resistance on the 200-day average, now at 9,643 points.

The latest batch of news and earnings from Saudi Arabian companies has been mixed. Saudi Basic Industries Corp (SABIC), the country’s biggest listed firm, reported a 39 percent drop in first-quarter net income on Sunday that was not as large a fall as analysts had forecast.

SABIC made a net profit of 3.93 billion riyals ($1.05 billion); seven analysts polled by Reuters had predicted, on average, that SABIC would make 3.50 billion riyals.

By contrast Saudi Arabian Mining Co (Ma’aden), the Gulf’s largest miner, said its first-quarter net profit more than doubled year-on-year, but the earnings still fell short of analysts’ forecasts.

The company’s profit was 260.9 million riyals, while Aljazira Capital and Deutsche Bank had forecast it at 326.2 million riyals and 593 million riyals respectively. The stock had surged 17 percent in the past two weeks in anticipation of the earnings, so it may now see profit-taking.

Dar Al Arkan, one of Saudi Arabia’s largest property developers, reported a 40.6 percent fall in first-quarter net profit on Thursday, but that was broadly in line with analysts’ forecasts.

The firm made 147.3 million riyals in the quarter; SICO Bahrain and NCB Capital had forecast 146.8 million riyals and 149.0 million riyals.

Retailer Jarir Marketing proposed a first-quarter dividend of 2.25 riyals per share, its highest since the third quarter of 2013, after posting an estimate-beating 23 percent rise in first-quarter profit earlier this month.

Oil prices fell on Friday but Brent crude’s 9.6 percent weekly gain was its biggest in more than five years.

Global equity markets also fell on Friday on disappointing earnings and reports about a crackdown on margin lending in China.

Source: Reuters