06/03/2011
TASI rebounds on Al-Assaf comments
TASIclimbed 7.26 percent to 5,709.91 points, its largest gain since Nov. 29, 2008
Saudi Arabia's stock index made its largest gain in more than two years on Saturday after Finance Minister Ibrahim Al-Assaf sought to reassure nervous investors.
The Tadawul All-Share Index (TASI), easing away from the previous session's 22-month low, climbed 7.26 percent to 5,709.91 points, its largest gain since Nov. 29, 2008.
The Saudi Press Agency quoted Al-Assaf as saying the country's economy is in an “excellent” shape and a rise in oil prices would boost its strong financial position.
“The Saudi bourse and the overall Gulf stock markets react away from economic factors,” Al-Assaf told Al Arabiya TV.
“For the first time, the Public Pension Agency bought some shares last week for the simple reason that prices became very attractive,” Al-Assaf said. “Me too, I seized the opportunity to buy some shares.” He expected the buying into shares to continue in the coming period, Reuters said.
Saudi Arabia's economy is solid and will witness, even as oil prices are exaggerated, a good surplus. Valuations are very promising at these levels and haven't been seen for many years,” John Sfakianakis, chief economist at Banque Saudi Fransi, Riyadh, said, adding investors going forward will look for clarity and confidence and that should determine the market's direction this week.
Saturday’s upsurge was due to the buying opportunities seen by many, including foreigners which seem to be building on their existing positions, Sfakianakis said.
Gulf stock markets have suffered from the regional jitters, while debt insurance costs rose across the world's top oil exporting region.
Al-Assaf said earlier that the Saudi economy had not seen any adverse impact from the regional turmoil. The Tadawul index plunged 15 percent last week as panicking investors dumped shares on fears following deadly protests in Oman and Bahrain.
The sector activity for the day was all positive. The gaining sectors ranged from 3.76 percent by the Media and Publishing sector to 8.53 percent by the Petrochemical Industries sector. The overall market breadth for the day was positive with 141 advancers against 2 decliners giving it an AD ratio of 70.5, the Financial Transaction House said in its daily market commentary.
The stock market turnover for the day reached SR5.73 billion.
Petrochemicals stocks were among the biggest gainers. Saudi Basic Industries Corp. (SABIC) added 9.09 percent and Rabigh Refining and Petrochemical Co. rose 9.84 percent.
Banks stocks also rose. Al-Rajhi Bank climbed 7.60 percent and Samba Financial Group added 9.75 percent.
About Al-Assaf’s reassurance to the market, Jarmo T. Kotilaine, chief economist at the National Commercial Bank (NCB), said: “It is difficult to disagree with the finance minister’s comments, especially with the oil price now looking likely to remain high for at least some time, something that in turn will underpin the government’s fiscal position. But the key near-term challenge has to do with investor confidence. Even as an unequivocal buying opportunity now exists, investor risk aversion has without a doubt increased and many will be careful about returning to the markets, as we have seen earlier during the global crisis.”
Moreover, he said, the regional situation still has the potential to curb any gains, however temporarily. Under the circumstances, a period of volatility is likely in the near term but this in turn should present savvy investors with opportunities to pick favorable entry points. From an economic standpoint, the minister’s statement and the news about the Public Pension Agency are welcome.
Faisal Alsayrafi, managing director and CEO of the FTH, said:“Tadawul’s jump Saturday shows investors are regaining their confidence in a big way which is good for the market. Over 7 percent jump in TASI in one day should also lift other regional markets as they resume trading on Sunday after Saturday being closed for regular holiday.”
All Gulf markets fell last week, led by Saudi Arabia, Qatar and Dubai, with Kuwaiti stocks at their lowest for more than six years and the Dubai Financial Market Index hovering around a seven-year low. Listings on the Gulf’s seven bourses had by last week lost $110 billion in market valuation since the start of the year, Agence France Presse said.
