Dubai
Saudi investors cheered after the government reinstated bonuses and other perks, even as institutional investors watched the Tadawul benchmark finally get elevated to the MSCI emerging market watch list.
The Tadawul index jumped as much as 400 points to a high of 7,336.53, the highest level since October 2015. The Tadawul index rose 5.5 per cent to close at 7,334.87.
“The Saudi ruler said that state employee benefits will be restored. Market read this as a positive as it would enhance consumer spending,” Farid Samji, Head of Asset Management, Daman Investments told Gulf News. “There is a possibility that lump-sum payments could be dished out to state employees on a retrospective basis in relation to cuts in compensation previously implemented,” Samji said.
The payments would mean immediate demand from consumers, whose confidence had taken a beating post a decline in prices of oil, from which the Saudi government derives the majority of its revenues.
Food and beverages index closed 6.28 per cent higher, Food and Staples ended more than 5 per cent stronger. The banking index closed more than 8 per cent higher.
Huge volumes were witnessed in Saudi stocks. Traded value jumped to 9.96 billion Saudi riyals, compared to 1-2 billion on a normal trading day.
Traded volumes in some stocks gained more than 10-50 times compared to an average of last 10 days. For example, shares worth 662 million riyals changed hands in Almarai, compared to 8 million riyals on Tuesday.
“With the Saudi Tadawul market being largely retail-driven, it came as no surprise that a dose of political announcements along with a confirmation of Saudi equities on the MSCI Emerging Markets watch list, catapulted the Saudi index to register solid gains, that too on heavy volumes,” Samji said.
Cautious
But some analysts were cautious on the broad based buying seen today. “The measures are positive developments, but markets need to behave rationally,” Nadi Bargouti, managing director, head of asset management, Emirates Investment Bank told Gulf News.
“Investors need to be careful, and they must buy stocks based on fundamental and not on sentiment, and the fundamentals of this market have not changed,” Bargouti said.
Because of tumbling oil prices, the Tadawul index has been a laggard in terms of performance compared to the UAE indices.
On Wednesday, elsewhere in the Gulf, the Dubai Financial Market General Index closed nearly 1 per cent lower at 3,418.30. The Abu Dhabi Securities Exchange index closed at 4,459.05, up 0.07 per cent. Both markets where down after crude oil prices fell nearly 3 per cent on Tuesday night, put the commodities into bearish territory.
MSCI watch list:
The MSCI added Saudi markets on its watch list, and announce its decision in June 2018, with implementation in 2019. The upgrade would mean inflows of about $10 billion in the kingdom and a weightage of 2.5 per cent on the index, according to analysts.
“Inclusion in the MSCI Emerging Markets Index would be a transformative catalyst not just for Saudi Arabia’s stock market but for exchanges throughout the entire region,” Bassel Khatoun, Chief Investment Officer, MENA Equities, at Franklin Templeton Investments (ME) Ltd, said.
“With approximately $2 trillion in active and passively managed money tracking it, MSCI’s EM Index is a significant dictator of equity market flows. Inclusion into MSCI EM will put Saudi, and the MENA region, firmly on the radar of international investors,” Khatoun said over email.
