Saudi market gains strength despite regional pressures

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The Saudi stock market has resisted geopolitical pressures to continue its positive trajectory. The prices of Saudi equities have now surged for the fifth straight week. John Sfakianakis, chief investment strategist at Masic in Saudi Arabia, acknowledged the upbeat sentiment among investors. “The trend from here one is likely to be an upward one but not without volatility and a corrective mood especially if geopolitics becomes more prescient in investors minds,” he told Arab News.  “Chinese demand is getting better. It’s still below trend but its now back up to the strongest levels of year on year growth since April 2011,” Sfakianakis said. Reuters reported last week that several events had convinced many people during the last few months, that Saudi authorities are now preparing to finally open the market, possibly within months. “An announcement is expected anytime between now and June 2014,” Reuters quoted Mohammad Omran, president of Riyadh’s Gulf Centre for Financial Consultancy, as saying. He is a member of the Riyadh Chamber of Commerce and Industry’s investment and securities committee. Reacting to these reports, Sfakianakis said: “From a technical perspective the authorities are gearing up and the investor community with a deep and long-term view welcome the opening of the market. The $1 million question is when will the opening take place.” Jarmo T. Kotilaine, a regional analyst, commented: “The gradual opening up is something that has been talked about for years. During that time, the market has developed significantly and preparations for opening up have been made at a number of levels.” He added: “Of course, the exact impact of such liberalization is never fully predictable but the experiences of the other GCC markets can serve as a good indication of the kind of impact such moves can have with time. By and large, the benefits of greater liquidity, more research and transparency, and access to new pools of capital are well recognized.” Commenting on market trends, Kotilaine also said: ‘The global economy remains vulnerable to significant discontinuities but, at least for now, there seems to be somewhat consistently greater optimism about the near-term outlook. This is somewhat mitigating the demand erosion concerns for oil and may mean greater resilience for prices, which would be good for the market.” He added: “Concerns about the possible impact of monetary policy tightening in the US are likely to remain a recurrent challenge but the basic outlook still remains one of very cautious, gradual steps, which should limit the downside risks”. The National Commercial Bank said in its earlier report that foreign investors are still anticipating decisions to ease their entrance into the Saudi market as the Capital Market Authority has highlighted the importance of foreign exposure toward developing the market’s depth and scope. GulfBase reported that 12 out of Tadawul’s 15 sectors closed in the upward territory last week, reflecting investor optimism.

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