Tadawul enjoys positive start to October

10 October 2011

Strong third quarter results boosts bourse

The Saudi Stock Exchange (Tadawul) has bounced back after suffering from the contagion effects of the global markets.

The Tadawul All-Share Index (Tasi) gained 0.61 per cent on 10 October, closing at 6,136.97 points, leading a four-day high with optimism for third quarter results. Plans by European leaders to recapitalise the banks to ease the debt crisis have also helped to inject some confidence back into the markets.

“In general we are expecting positive earnings for Saudi companies and in particular it will be positive for the energy sector on the back of higher oil prices,” says Hesham Bakry, trading manager at UAE-based investment bank Rasmala.

On 8 October, the Tasi rose 1.4 per cent to 6,084.55 after crude oil exceeded $80 a barrel.

Saudi Basic Industries Corporation, the largest petrochemicals maker in the world is expected to announce positive growth in the third quarter. Its subsidiary, the Saudi Arabian Fertilizer Company, has already announced that profits had doubled, beating analysts’ estimates.  

Yanbu National Petrochemicals Company (Yansab), another Sabic subsidiary, posted a 132 per cent rise in net profits for the third quarter.

Methanol Chemicals Company gained 5.3 per cent after posting a SR26.7m ($7.12m) profit for the third quarter. It was the most successful quarter for the company, which announced a loss of SR15.6m in the same period last year.

These results have boosted the stock exchange and optimism still remains high.

The one-week high follows on from a six-week slump, during which the country witnessed some riots in its Eastern province where 14 people were injured in clashes with the police on 3 October. The impact of this on the bourse was minimal, but as protesters continue to stage demonstrations, it could potentially affect investor sentiment.

“The Tadawul has not been affected much by these uprisings, we still see the same values of trading with the index performing on average SR3bn to SR3.5bn daily,” says Bakry.

The Tasi lost 1.44 per cent on the day of the protests and fell a further 0.98 per cent to 5,965.13 the following day. While the protests have not had much affect on the Tadawul, they do highlight brewing tensions in the country.

Shias make up about 15 per cent of the population, most of which are in the Eastern province, home to much of the country’s oil reserves.

More protests erupted over the weekend and the state has promised a hardline stance against any more protests.

The unrest is unlikely to cause a breakdown in the government or the political system as seen in Bahrain, but it proves that Saudi Arabia cannot appease its entire population simply by pumping large amounts of money into public spending.

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