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Saudi investors monitor stocks at at the National Commercial Bank (NCB) in Riyadh. Image Credit: AFP

Dubai: The foreign inflow has slowed in Saudi’s Tadawul even as the pace of gains on the index has been shrinking.

Around $2-3 million inflows were witnessed in the last two days of February, compared to $15-20 million of daily inflows in January, according to sources.

“Earlier there were 10-15 companies which used to get foreign flows of $1-7 million, now it is just 7-8 companies which are getting inflows and outflows,” Muhammad Shabbir, Head of Funds and Portfolios at Saudi Kuwaiti Finance House (SKFH) said.

This kind of technical buying would continue, but if we look at fundamental factors in terms of valuations they are much better markets in EM now after the surge.

- Luca Paolini | Chief Strategist at Pictet Asset Management

The flows have been in tandem with the gains on the Tadawul index, which gained 9.8 per cent in February compared to a fall of 100 points in February.

“The market would remain sideways due to lack of fundamental news. The initial flows are coming in and they will move in tandem with emerging markets,” Shabbir said. Saudi Arabia’s Tadawul index is expected to be included in the FTSE emerging market index from March 18 in a five tranche program, At the end the index will represent 3 per cent of the index.

“This kind of technical buying would continue, but if we look at fundamental factors in terms of valuations they are much better markets in EM now after the surge,” Luca Paolini, Pictet Asset Management’s Chief Strategist, told Gulf News.

Outlook

“The outlook on Tadawul index is still positive, and we are not sure how far higher this can go. There are supported at lower levels, and we won’t see a decline any time soon,” Shabbir said.

GAINS SLOW ON TADAWUL INDEX
Image Credit: Gulf News

Analysts expect an upside of another 500 points from here. “The main trend still remains bullish on Tadawul index and is headed towards our final target of 9,000. Fresh buying can again be seen from the lower support levels of 8,200,” Shiv Prakash, senior analyst with First Abu Dhabi Bank Securities said.

The Dubai index consolidated at higher levels, indicating that the rally came to a halt devoid of any major selling. The Dubai Financial Market general index closed 0.25 per cent higher at 2,642.34. The index has gained 4.45 per cent so far in the year on the back of gains in bellwether Emaar Properties.

“Emaar Properties has an opportunity to break through the Dh5 this week as it is still attracting inflows especially as new FTSE adjustments to UAE stocks prove Emaar’s group is solid while other real estate stocks as Damac and Aldar have been downgraded to mid-cap stocks at this time,” Issam Kassabieh, Senior Financial Analyst at Menacorp, said. Emaar Properties has outperformed the general market index, gaining 24 per cent in February.

The Abu Dhabi Securities Exchange has been benefiting due to outperformance in banking stocks. The Abu Dhabi index has gained 4.18 per cent in the first two months.

The focus is expected to remain on banks in the coming sessions amid the changes in the index components. “The upgrade of ADIB [Abu Dhabi Islamic Bank] to mid-cap names could be a potential hint to the bank focusing on foreign ownership limits in the near future,” Kassabieh said.