Markets Update: Investors will be eyeing Saudi Arabia¿s stock market this week in expectation of the last set of first-quarter results.
On watch for final set of Saudi results
Investors will be eyeing Saudi Arabia's stock market this week in expectation of the last set of first-quarter results.
Trading has ballooned on the Tadawul All-Share Index in the past two months amid speculation that the bourse will open up to foreign investment this year.
"Saudi Arabia is a really good story," said Saleem Khokhar, the head of equities at National Bank of Abu Dhabi. "There are very good reasons for owning it. You have the infrastructure spending combined with high oil prices.
"On top of that, foreign ownership is on the cards."
The Tadawul has risen 17 per cent so far this year, closing at 7,513.85 points on Wednesday, its final trading day for last week. Daily traded value has jumped from 8 billion Saudi riyals on March 14 to about 10bn riyals last Wednesday.
Valuations on the Tadawul are at a premium to the rest of the region, about 14 times earnings, compared with about 11 times for the Middle East and North Africa overall, which Mr Khokhar says is acceptable, given the results from Saudi banks so far.
"Loan growth in Saudi Arabia has been very strong, when compared to the UAE, and justifies the valuations," he said.
Al Rajhi Bank reported a quarterly profit of 2bn riyals, an increase of 18 per cent from last year's first quarter. Net income at Banque Saudi Fransi reached 789 million riyals, an increase of 10 per cent from last year's first quarter. First-quarter profit at Saudi British Bank increased 13.7 per cent to 854m riyals. Bank Al Jazira's first-quarter profit surged 131 per cent year on year to 143m riyals.
By contrast, UAE stock markets have experienced a correction and slowdown since the rise of the Dubai Financial Market (DFM) General Index peaked at 30 per cent.
The coming quarterly results should provide assurance for traders on whether the current valuations in UAE stocks are justifiable, Mr Khokhar said.
The DFM General Index fell 2.2 per cent last week to end the week at 1,638.25. The Abu Dhabi Securities Exchange General Index slipped 0.1 per cent for the week to finish at 2,500.22.
The UAE markets regulator requires companies to report their quarterly results within 45 days of the end of the relevant period. By contrast, the Saudi regulator requires companies to publish their quarterly results within 15 days of the end of the period.
The Egyptian Exchange is likely to drift in coming days while investors await the outcome of protests planned for Friday against the disqualification of three leading candidates for the presidency.
If the protests turn violent, the market could drop sharply. If they pass peacefully, the market could even rise slightly, analysts said, but volumes are likely to remain low while uncertainty remains over who will form the next government.
The political landscape has been altered just weeks ahead of next month's election with the disqualification of Omar Suleiman, who served the former president Hosni Mubarak as intelligence chief; the Muslim Brotherhood's nominee; and a Salafist sheikh.
For some, the removal of three controversial figures from the competition has boosted the likelihood of a peaceful transition to democratic governance. But it has also raised the immediate risk of an angry reaction from the disqualified candidates' supporters.
"There are other candidates who can always fill their shoes. And everyone is worried about what happens with the protests this Friday," said Omar Darwish of CIBC brokerage.
Egypt's benchmark index soared 51 per cent at the start of the year, making it the world's best-performing market, but is now down 15 per cent against a backdrop of growing confrontation between the Brotherhood, which dominates parliament, and the country's interim military rulers.
* with Reuters