Saudi Arabia's index hit a new seven-month peak on Tuesday, but blue chips were little moved in a muted response to the kingdom's record budget. Saudi plans to spend 580 billion riyals ($155 billion) in 2011 as it tries to create jobs for its fast-growing population.
"Saudi Arabia is still expanding its spending, focusing on education, healthcare and infrastructure and the budget seems to also be aimed at stimulating the private sector," said Haissam Arabi, chief executive of Gulfmena Alternative Investments. "The market should go up some more. Saudi is back in focus." The index rose 0.2 percent to its highest close since May 12, with the headline budget figure already priced in, analysts said. Saudi Telecom Co rose 1.2 percent.
Arabi was bullish about the kingdom's long-term prospects, but warned this year's spending - also a record - has had little impact on listed firms. "There's still a disconnect, but it probably takes time to trickle down to the private sector," he said. The building and construction index rose 0.5 percent to take its gains to 12 percent in December as investors bet on a windfall from bumper state spending.
"Investors should be cautious - builders' Q4 earnings won't be that great, while project announcements would not feed into the bottom line for a for another six to eight months," said a Riyadh-based trader who asked not to be identified. Industries Qatar rose 1.7 percent, helping Doha's benchmark end a three-session losing streak. Volumes slumped to a three-week low. "Volumes are back to where they were before the World Cup announcement - investors are looking more at valuations and so specific stocks will outperform," said Robert Pramberger, acting head of asset management at The First Investor in Doha.
This is in contrast to euphoric trade following the December 2 FIFA vote, when nearly all Doha stocks surged after Qatar was chosen to host the 2022 soccer World Cup. "Qatar institutions have been selling because we're nearing the year-end and they want to close positions to book profits on their balance sheets," said Hani Girgis, assistant chief dealer at Dlala brokerage. "But foreign institutions are preparing for the future and so continue to be buyers."
Yet Qatar's foreign ownership limits - 25 percent for all bar a few stocks - could hamper more gains as some names including Commercial Bank of Qatar near their ceiling. Builder Arabtec fell 1.5 percent and Emaar Properties dropped 1.1 percent as Dubai's index slipped to a 15-week low. "Maybe investors prefer to watch and wait for the Q4 earnings season to avoid any surprises," said Mohamed Khaled, Prime Emirates relationship manager.
Arabi pointed to uncertainty over UAE real estate as a major drag. Indebted Aldar Properties is expected to get government support by year-end, but with 10 days to go no deal has been forthcoming, while Dubai's Emaar has yet to say what it will do with stricken mortgage affiliate Amlak.
Comments
Comments are closed for this article.