x Abu Dhabi, UAEWednesday 17 January 2018

Strong Saudi trading brings hope for UAE

Saudi stocks buck the regional trend.

Higher oil prices drive growth of petrochemical shares

There were few winners in local markets yesterday, as a region-wide sell-off continued in response to political turmoil in Egypt.

But that's what made the Saudi stock market's performance all the more remarkable. The Saudi Tadawul All-Share Index gained 2.5 per cent yesterday, by far the top performance among regional bourses.

Saudi petrochemical stocks led gainers, rebounding from Saturday's 14-week low that was sparked by the events in Egypt.

What was the primary catalyst? The answer is higher oil prices, which paradoxically were also due in part to rattled investors trying to forecast what the events in Egypt mean for the world economy.

Oil prices rose 4.3 per cent on Friday, which bodes well for Saudi Arabia in particular as rising crude prices are usually thought to boost petrochemical producers' earnings.

Saudi Basic Industries Corporation climbed 2.8 per cent, Yanbu National Petrochemical added 3.5 per cent and Rabigh Refining and Petrochemical rose 4 per cent. The petrochemicals index added 2.4 per cent.

Saudi's index dropped 6.4 per cent on Saturday, its biggest decline since May, to a 14-week low.

"Saturday's selling was an emotional reaction to what happened in Egypt," said Youssef Kassantini, a Saudi-based financial analyst. Mr Kassantini added many investors were looking for "a good buying opportunity".

The uptick, however, was not limited to energy stocks, as the top 10 shares by volumes - including a bank and a telecommunications operator - all finished in positive territory. Even Emaar's Saudi unit, Emaar the Economic City, closed up almost 4 per cent. That is striking as the parent company, Dubai's Emaar Properties, was among the biggest losers among UAE markets yesterday.

The broad range of strong performance in Saudi yesterday provides the possibility that given another day to process the implications of what is happening in Egypt, UAE investors will similarly decide it's not so bad after all.

* with agencies