Saudi bourse may be soft before economic reform announcement

Saudi Arabia’s stock market may remain weak Monday before the announcement in the evening of details of the kingdom’s economic reform plan.

The National Transformation Plan (NTP), a key part of efforts to restructure the Saudi economy and make it less dependent on oil revenue, will be put before the cabinet for approval on Monday, a senior Saudi source told Reuters.

Details of the NTP will be disclosed in daily news conferences with government ministers starting on Monday evening. Although it is not clear exactly which economic steps will be discussed, the wider reforms will include subsidy cuts, tax rises, sales of state assets, a government efficiency drive and efforts to spur private sector investment.

“Some sectors have to brace themselves for further subsidy cuts and other austerity measures in the near term before they can reap the longer-term benefits,” said a Riyadh-based analyst.

On Sunday investors dumped shares in petrochemical and other industrial sectors because of that worry. Riyadh’s stock index has fallen 6.6 percent since the original announcement of the reform drive in late April.

But some sectors could quickly see opportunities in the reform plan. On Sunday, Saudi Real Estate Co said it had agreed with U.S. firm Starwood Hotels and Resorts to build two hotels next to a district of Riyadh which the government plans to develop into an international business zone.

The healthcare sector could also benefit from opportunities as the kingdom privatises hospitals and other healthcare operations.

In the rest of the Gulf, stock markets look likely to be supported by a positive global mood, with MSCI’s broadest index of Asia-Pacific shares outside Japan up 0.6 percent after U.S. jobs data appeared to reduce the chances of a U.S. interest rate hike any time soon.

Source: Reuters