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Reuters
Saudi Arabia’s stock market pulled back because of profit-taking on Wednesday ahead of a decision by index compiler FTSE Russell on whether to upgrade Riyadh to emerging market status, while most other regional bourses were also weak.
The Saudi index has surged in recent weeks on expectations of a positive decision by FTSE on Wednesday. If MSCI also decides in June to make Saudi Arabia an emerging market, the bourse— which now has a capitalisation of about $500 billion—could see foreign fund inflows exceeding $40 billion in the next couple of years, analysts calculate.
The recent surge has left many valuations in line with or slightly above other emerging markets, however, so some fund managers think the index could drop back after a positive FTSE decision.
The Tadawul index fell 0.5 percent to 7,900 points in active trade on Wednesday, remaining up 9.3 percent year-to-date.
Previous decisions by index companies have had little lasting impact on regional equity markets and “if oil prices drop back over the next couple of years as we expect, the rally in the Tadawul is likely to fade,†London-based Capital Economics said in a report.
Khaled Feda, senior research manager at Alistithmar Capital, said the picture remained fundamentally strong.
“The outlook is generally positive. The crown prince’s visit to the US and the expected inflow of foreign investment, as well as the global indexes inclusion—all these factors boost the index,†he said.
Al Rajhi Bank, which has been the main target of foreign fund inflows ahead of the FTSE decision, pulled back 2.3 percent. SAMBA Financial Group and Saudi Telecom lost 2.3 percent each.
Al Andalus Property Co dropped 7.7 percent in its heaviest volume since May 2016, after the company reported fourth-quarter net profit of 15.0 million riyals, down from 15.8 million riyals a year earlier. Real estate developer Jabal Omar rose 2.2 percent and food company Savola added 2.7 percent.
In Dubai, the main index was 0.1 percent lower as low-cost airline Air Arabia fell 2.5 percent to its lowest level. The Abu Dhabi index lost 1.3 percent with FAB losing 3.0 percent and Abu Dhabi Commercial Bank falling 3.4 percent.