By KHALIL HANWARE | ARAB NEWS
Published: Oct 29, 2011
01:49 Updated: Oct 29, 2011 01:49
JEDDAH:
The Saudi stock market is likely to make major gains when the
bourse resumes trading after Eid holidays on Nov. 12, analysts said
Friday.
The market,
which showed some positive signs last week, will be closed for the
Haj holidays with the authorities announcing Nov. 5 as the day set
for standing on Mount Arafat, and Nov. 6 as the date to mark Eid
Al-Adha feast.
The Tadawul
All-Share Index (TASI) gained 0.67 percent on weekly basis, closing
at 6,147.54 points, led by the petrochemical sector. Analysts said
Middle East stock markets also stand to gain in the short-term from
the European debt deal.
“The performance
of the Saudi stock market depends on local and regional factors as
well as the euro zone debt crisis. Due to Saudi stock market’s link
to global markets, the positive outlook for the market depends on
how euro zone recovers quickly from its debt crisis, which has
impacted globally,” Faisal Alsayrafi, a financial adviser,
said.
Paul Gamble,
head of research at Jadwa Investment, said: “Saturday should be a
good day for TASI as it will follow other markets in responding
positively to the results of the euro area summit. However, there
are still many details that need to be finalized. This process will
go on through Eid Al-Adha, including an important G20 meeting.”
He added:
“Although third quarter results were good and the economy remains
healthy, the market is being driven by global issues rather than
local ones. Global sentiment will remain the key determinant of
performance after the holiday.”
The mood in the
markets the world over has clearly taken a sharp turn for the
better, partly because of the results of the latest summit in
Europe and partly due to somewhat more encouraging data from the
US, Jarmo T. Kotilaine, chief economist at the National Commercial
Bank,
said.
“The European
Union summit offered significant progress in three key areas.
Firstly, there was an overdue agreement on a haircut for private
holders of Greek sovereign debt. This should reduce the debt burden
facing Greece, although its ultimate benefits may prove fairly
limited, not to say mixed, as it will also engender economic
losses. Secondly, the need to recapitalize European banks was
recognized and a deal agreed on, which should boost confidence in
their ability to weather the sovereign debt storm. Thirdly, there
was an important agreement to boost the resources of the Financial
Stability Facility which is essential so as to credibly assuage
contagion fears,” Kotilaine said.
Even though the
near-term impact of these developments is positive, he said there
are a number of question marks pertaining to the EU deal and its
ultimate effectiveness. The Greek debt exchange is voluntary and
will naturally involve sharp losses and new capital requirements
for banks agreeing to it. Even if the deal is successfully
executed, Greece’s debt to GDP ratio will be 120 percent,
dangerously close to unsustainability. Moreover, the implementation
of these plans will take some time and involve uncertainties. It is
likely that the success of the deal will be questioned at some
point and the basic market outlook therefore probably remains one
of continued volatility, Kotilaine added.
However, NCB
said in its latest report that during the third quarter of this
year, Saudi Arabia witnessed only two initial public offerings
(IPOs). The lack of primary market appetite can be attributed to
the global turmoil and deteriorating investor sentiment. The
risk-averse attitude of local investors triggered by global
uncertainty pushed investors to seek safer assets.
Saudi Arabia was
the only market in the GCC (Gulf Cooperation Council) region to
witness activity in the primary market during the third quarter.
The local market is expecting a further five IPOs before the end of
the year. If these announcements materialize, it will prove the
resilience of the Saudi equity market to global turmoil and help
support the main stock market index into the positive territory for
this year, the NCB report said.