Record foreign buying of Saudi stocks in January

Time: February 05, 2019  

Record foreign buying of Saudi stocks in January
International funds are seeking to build exposure as some of the stocks will be added to emerging-market indexes compiled by MSCI and FTSE Russell. Local funds, on the other hand, are buying less.
By Bloomberg

Foreigners made their highest net purchases of Saudi shares on record last month, following the inclusion of local stocks in major benchmarks.

Investors from outside the country and the Gulf were net buyers of around 4.4 billion riyals ($1.17 billion) of Saudi-listed stocks in January, the most for a single month since data became available in 2015.

International funds are seeking to build exposure as some of the stocks will be added to emerging-market indexes compiled by MSCI and FTSE Russell. Local funds, on the other hand, are buying less.

The purchases mark a change in trend after a sell-off triggered by the killing of Jamal Khashoggi inside the Saudi consulate in Istanbul last October. Back then, foreigners sold the most for a single month since they were allowed to directly trade in the country. As volatility surged, funds tied to the government were constantly mentioned by traders and investors as giving support to the market, by purchasing mostly large caps. The main Saudi index is up 8.9 percent this year.

Investors jumping at Saudi stocks now are finding high prices and an economic scenario that doesn’t corroborate expensive valuations, according to Tina Byles Williams and Adam Choppin, respectively the chief executive officer and investment officer at FIS Group Inc.

“Speculation around huge foreign inflows are based on naive assumptions about how index providers and ETF issuers trade through such events, and we believe those waiting for ‘dumb passive money’ in Saudi will be kept waiting come fall 2019,” they wrote in a report.

“Following index inclusion, we expect to see a fair degree of selling pressure as state affiliated Saudi investors use the inclusion as a liquidity event for chunks of their Saudi equity portfolio.”

This article was first published in Arabian Business

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Saudi market jumps 4 percent to make up for yesterday’s losses

Time: October 15, 2018     

Saudi’s stock market closed higher by 4.14 percent at the end of Monday’s exchanges. (AFP)

Saudi’s stock market closed higher by 4.14 percent at the end of Monday’s exchanges, in a strong rebound after losses it faced on Sunday.

The stock market main indicator raised with about 300 points, to exceed 7567 points level; amid active exchanges that exceeded about SAR 6.3 billion. With this increase the stock market would have made up for yesterday’s loses and even passed it ascendingly by about extra 50 points.

The decline was limited to only one stock in the Saudi market by the end of the session. The market was supported by attractive price- to-earnings ratios (P/E) that emerged after the recent losses on Sunday and last week. The average P/E for Tadawul reached 14x during the lows of Sunday’s trading. It stands now at 15.93x after Monday’s rebound.

The Saudi stock market enjoys an average dividend yield of 3.7 percent supported mainly by the robust growth of profits in Banking and Petrochemicals sectors.

It has attracted foreign inflows after the decision of inclusion in MSCI emerging markets index, in which it is expected to represent a weight 2.6 percent, which in total is worth $1.9 billion.

The actual inclusion in MSCI’s Emerging Market Index will be in two phases concurring with the May 2019 Semi Annual Index Review and the August 2019 Quarterly Index Review. The Saudi Stock market Index was also recently added to the FTSE Russell as a Secondary Emerging market in March 2018.

A Saudi investor monitors the Saudi Stock Exchange, or Tadawul, on December 14, 2016 in. (AFP)

Role in oil markets

Mohammed al-Omran, CEO of Amak Investments, told Al Arabiya English: “that regaining rust in the Saudi stock market was very quick with the officials’ statements. Including the statement of Khalid al-Falih, the Minister of Energy, Industry and Mineral Resources, in which he asserted the Kingdom’s major role in the oil markets.

Al-Omran highlighted the importance of the increasing profits of the companies in strengthening the capitals of the Saudi stock market, especially in the petrochemical companies, which recorded high growth rates.

Which enhances the Saudi Market attractiveness and reinforces the profitability and attracting investors. He considered today’s session had made up for the losses of the previous session, proving the ability of the Saudi market capitals to protect its exchanges.

Al-Omran also pointed to the imminent implementation of sanctions on Iran and the impact on energy markets, in line with Saudi Arabia’s commitment to ensuring the stability of energy supplies and its role in protecting prices from rising sharply and returning to high levels.

He added that Saudi Arabia has a global economic importance, represented in several aspects; including its role in the oil markets. It is the 18th on the G20, as well as its impact on the global petrochemical markets. In addition to its role in preserving economic stability in the region.

This article was first published in Al Arabiya English  

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Saudi bond index inclusion paves way for $30bn regional windfall

Time: September 27, 2018 

The Kingdom is to be included in JP Morgan’s emerging market government bond indexes next year after reforms to reduce dependence on oil revenues. (Reuters)
  • Inclusion in the indexes helps to reduce borrowing costs and opens up Saudi Arabia to a much bigger pool of debt investors
  • A similar trend is also under way in equities with the Kingdom’s recent inclusion in the MSCI Emerging Markets Index

LONDON: Saudi Arabia is set to be included in JP Morgan’s emerging market government bond indexes next year, potentially unlocking billions of dollars in fresh investment.
It comes at a key time for the Kingdom’s emerging capital markets as both the government and companies increasingly consider bond sales to raise capital, encouraged by financial reforms that are aimed at reducing economic reliance on oil revenues.
Inclusion in the indexes helps to reduce borrowing costs and opens up Saudi Arabia to a much bigger pool of debt investors.
A similar trend is also under way in equities with the Kingdom’s recent inclusion in the MSCI Emerging Markets Index.
The UAE, Bahrain, Kuwait and Qatar will also become eligible for EMBI Global Diversified (EMBIGD), EMBI Global (EMBIG) and EURO-EMBIG indexes, Reuters reported on Wednesday. The process will be phased between Jan. 31 and Sept. 30, 2019.
That could lead to an estimated $30 billion in inflows, leading to tighter spreads and making primary market access easier, according to Bank of America Merrill Lynch.
Bahrain could emerge as the biggest beneficiary from EMBI inclusion.

FASTFACTS

Saudi Arabia, Bahrain, Kuwait, Oman and Qatar have issued a quarter of all new debt sold by emerging market countries over the last three years, according to Reuters data.

 

“This will provide not only large flows as a percentage of debt outstanding, but is also likely to be crucial for future external financing needs,” BoAML said in a note in August.
“One of the clear benefits of being a member of a major benchmark is that investors generally have at least some exposure to each country (particularly if it is reasonably large like Bahrain) to avoid deviating too much from the benchmark.”
Saudi Arabia, Bahrain, Kuwait, Oman and Qatar have issued a quarter of all new debt sold by emerging market countries in each of the past three years, according to Reuters data.
Gulf sovereign bonds rose on the news on Wednesday.
The collapse of oil prices in 2014 as well as regional economic reform initiatives have encouraged Gulf states to turn to debt markets to fund spending that in the past may have been paid for with oil sales.
“GCC index inclusion is a timely recognition of the fact that issuance from the region represents over
15 percent of the stock of emerging market debt, and provides important diversification benefits,” said Mohieddine Kronfol, chief investment officer of Global Sukuk and MENA Fixed Income at Franklin Templeton Investments.
The moves comes as Saudi corporate borrowers such as Saudi Basic Industries Corp. (SABIC) and Saudi Electricity tap debt markets to raise funds.
SABIC is preparing to offer a dollar-denominated unsecured bond to the global market with investor meetings this week.
The Kingdom’s petrochemical giant will be meeting investors in London, New York, Los Angeles and Boston, according to a filing on the Saudi stock exchange on Tuesday.

This article was first published in Arab News

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S&P Dow Jones to upgrade Saudi stocks to emerging market next year

Time: July 25, 2018

DUBAI (Reuters) – Global equity index compiler S&P Dow Jones Indices will upgrade Saudi Arabia’s bourse to emerging market status from a stand-alone market next year, becoming the latest in a series of index firms to promote Riyadh.

S&P Dow Jones will add major Saudi stocks to its global indexes with a 50 percent weighting in March 2019 and raise their weightings to 100 percent in September, the company said in a statement late on Tuesday.

This article was first published in Reuters

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Saudi stocks rise to three-year high as IMF raises growth forecast

Time: July 17, 2018

The index of major Saudi stocks closed today, up 85.66 points to close at 8490.75 points, the highest index level in three years, but trading remained at medium levels, worth more than 3.3 billion riyals.

Mohammed Al Omran, CEO of Amak Investments, said in an interview with Al Arabiya News Channel that the general optimism in the Saudi stock market comes from strong support from banks’ results, corporate cash dividends and positive results for the financial performance of companies and banks.

He said that the rise of the banking sector by 2% during trading on Monday, comes after raising the expected cash distribution rates and the expected results in the banking sector would be its highest on record.

The number of shares traded on Monday stood at more than 124 million shares, which were shared by more than 90,000 transactions in which 95 companies registered gains, while 69 companies closed down.

This comes as the International Monetary Fund (IMF) on Monday raised its growth forecast for the world’s top crude exporter Saudi Arabia, citing higher oil prices.

In its World Economic Outlook update, the IMF said the Saudi economy — which contracted by 0.9 percent last year — would grow by 1.9 percent in 2018, up 0.2 percentage points from its April projections.

This is the third time since October that the organization has raised its growth forecasts for the kingdom, reflecting soaring oil revenues which make up more than 70 percent of Saudi income.

This article was first published in Al Arabiya English  

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Foreign Investors Share Exceeds 5% in Saudi Stock

Time: July 16, 2018

Riyadh- Shuja Al-Baqmi

Ownership of foreign investors in Saudi Stock Exchange (Tadawul) is on a rise reaching a new level of 5.02 percent.

The growing rise in the ownership of foreign investors in the Saudi stock market reflects trust in the Saudi financial market on the one hand and the high level of confidence the Saudi economy enjoys on the other.

These developments come as the Saudi economy, the largest in the Middle East, achieved positive growth in the first quarter of this year, at 1.2 percent.

According to the General Authority for Statistics (GaSTAT), gross domestic product of non-oil sector in Saudi Arabia achieved a more positive growth rate during the first quarter of this year reaching 1.6 percent, while the growth rate of the government’s non-oil sector was about 2.7 percent during the same period.

Data showed that Saudi GDP rose 1.2 percent at the end of the first quarter of this year to reach $ 172.7 billion, compared with $ 170.7 billion during the same period in 2017.

Non-oil GDP rose by 1.6 percent by the end of the first quarter of this year to $ 98.9 billion.

This article was first published in Asharq Al-Awsat 

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Video: Saudi Market Will Continue to Do Well, Exotix Capital’s Malik Says

Time – July 10, 2018

An exchange-traded fund tracking Saudi Arabian shares has delivered the biggest return among peers so far this year as investors anticipate an upgrade of the Middle East’s biggest economy to emerging markets status. The iShares MSCI Saudi Arabia ETF, or KSA, has returned 17 percent year-to-date, Hasnain Malik, global head of equity research at Exotix Capital, weighs in on “Bloomberg Daybreak: Middle East.” (Corrects company name in headline) (Source: Bloomberg)

This article was first published in  Bloomberg

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Foreign Investors Share in Saudi Market Reaches 5%

Time: July 09, 2018

Investors talk with each other as they monitor a screen displaying stock information at the Saudi Stock Exchange (Tadawul) in Riyadh, Saudi Arabia. (Reuters file photo)

Riyadh – Shujaa al-Baqmi

The share of foreign investors in the Saudi stock market, by the end of trading on July 5, reached 5 percent, with a total ownership of $25.9 billion.

In this regard, the Saudi Stock Exchange (Tadawul) announced that net foreign purchases of foreign direct investment last week amounted to $43.1 million dollars.

Increased foreign investor ownership in the stock market reflects the appeal of the Saudi financial market and the high level of confidence its economy enjoys.

This article was first published in Asharq Al-Awsat 

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A Saudi Stocks ETF Has Beaten All Emerging Markets Peers in 2018

Time: July 09, 2018

An exchange-traded fund tracking Saudi Arabian shares has delivered the biggest return among peers so far this year as investors anticipate an upgrade of the Middle East’s biggest economy to emerging markets status.

The iShares MSCI Saudi Arabia ETF, or KSA, has returned 17 percent year-to-date, more than any other of the 229 ETFs focused on emerging-market equities tracked by Bloomberg. Its gain compares with an average loss of 6.6 percent for the group in the same period

Qualified foreign investors have been net buyers of Saudi shares in all but three weeks this year on anticipation that the country would earn emerging markets classification from major index compilers this year. FTSE Russell announced the upgrade in March with implementation starting next year, and MSCI Inc. followed suit last month.

Total assets of the KSA fund have increased almost 20 times to $271 million since December. The fund has Saudi Basic Industries Co., Al Rajhi Bank and National Commercial Bank as its top holdings. All of these are expected to be added to emerging markets indexes compiled by FTSE and MSCI.

Bets on the upgrades have helped the Tadawul All Share Index gain 14 percent gain this year, one of the biggest advances among major benchmarks globally. And as the interest in Saudi stocks grows, other investment firms are launching similar products. Franklin Templeton Investments is seeking approval from U.S. regulators for a Saudi Arabia ETF, while Invesco Ltd. last month listed Europe’s first fund tracking the country’s shares.

This article was first published in Bloomberg

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Is Saudi Arabia The Next Hot Investment Opportunity?

Time: July 06, 2018

Saudi Arabia’s addition to indexer MSCI‘s (MSCI) group of emerging markets starting in June 2019 is expected to lure $40 billion in foreign investment to that country. Now, U.S. investment firms are looking to get in on the action.

Franklin Templeton Investments, a longtime active asset manager, is seeking approval for a Saudi Arabia ETF, according to a filing with the U.S. Securities and Exchange Commission on June 22.

Currently, there’s only one such fund, iShares MSCI Saudi Arabia (KSA). It has about $269 million in assets, a figure that’s ballooned by as much as 1,700% this year, the most among all single-country funds. This comes at a time when investors are pulling billions from broad emerging-market funds and investing in single-country ETFs.

“For Saudi Arabia and the region, this is a great opportunity to move into the limelight of international foreign investors, and to attract inflows,” said Michael Bolliger, the head of emerging-market asset allocation at UBS Wealth Management’s (UBS) chief investment office.

The 20 countries promoted to MSCI emerging-market status since 1994 had a median return of 55% in the year before official inclusion, according to Bassel Khatoun, managing director for frontier and MENA, and Salah Shamma, head of investment for MENA, at Franklin Templeton Emerging Markets Equity.

Price War?

It’s unclear how Franklin’s fund will differentiate itself from KSA or what it will charge investors. But when the firm made its passive ETF debut in November by launching 16 single-country funds, it clearly tried to undercut rival BlackRock (BLK). Franklin charges less than $1 for every $1,000 invested in its developed single-country ETFs and $1.90 for emerging-market funds, while BlackRock charges at least $4.80 for developed markets ETFs and $6.20 for EM funds.

Two weeks ago, foreign investors jumped at the opportunity to invest in Saudi Arabia when Invesco (IVZ) issued the first European ETF to track the country’s shares in expectation of MSCI upgrading the country’s status.

This article was first published in INVESTOR’S BUSINESS DAILY

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