Middle Eastern stock markets rallied in the first quarter of 2012, recovering most of the losses of 2011. But the region’s biggest bourse has gone a step further. Since Egyptian protesters took to the streets of Cairo in January last year, in Saudi the stock market has risen by 20 per cent and trading volumes have doubled.
Record oil earnings are the simple explanation for increased optimism in the kingdom, HSBC said in its quarterly regional economic outlook. Saudi Arabia is likely to earn $300bn from oil exports in 2012, more than ever before. As a result, the bank has raised its economic growth forecast for the country by a full percentage point, to 4 per cent this year.
The government’s $130bn stimulus package already appears to be feeding into the economy, the bank said, with fourth-quarter economic data showing “a clear shift in growth drivers from the oil to the non-oil sector, and the partial displacement of public consumption with private sector demand.”
Economic indicators for the non-oil sector suggest growth remained robust in March, with the country’s Purchasing Managers’ Index, which measures activity in the sector, showing output and new orders continuing to rise.
Saudi banks have been one beneficiary of economic good fortune. The banking index of the Saudi exchange is up 23 per cent in 2012, and industry-wide profit rose 14 per cent in 2011, the Boston Consulting Group said in its recent Middle East banking performance index.
The profit growth was helped by a 37 per cent drop in loan provisions, which decreased on average by just 2 per cent across the region. Corporate banking in the country made the most noticeable improvement, with its profitability up 30 per cent for the year.