Gulf stock markets rose on Sunday despite oil’s weakness as Saudi Arabia’s plan to maintain government spending at a high level boosted investor confidence.
The Saudi government released a 2015 state budget last Thursday that provides for a 0.6 percent increase in spending from this year’s plan. That cheered the retail investors who dominate Gulf stock markets; they had feared falling oil revenues would trigger spending cuts across the region.
The new mood of optimism in the Gulf helped investors largely ignore the fresh decline in the price of Brent crude oil, which closed below $60 a barrel on Friday.
The main Saudi index rose 1.2 percent in active trade as most sectors gained. Saudi Arabian Mining Co (Ma’aden) surged 7.8 percent to 33.10 riyals, continuing the leg up which started late last week when Riyad Capital lifted its price target for the stock to 49.00 riyals from 46.00 riyals.
But National Commercial Bank, the kingdom’s biggest lender, lost 1.2 percent after proposing a dividend of 0.65 riyal per share for the second half of 2014, its first since listing last month.
Takween Advanced Industries rose 1.5 percent after saying it was in final talks with food maker Savola Group on buying Savola’s packaging unit. Shares in Savola added 2.1 percent.
The early-December panicked sell-off in the Gulf made valuations across the region more attractive, and analysts expect profitability at most companies to be just fine next year even if oil prices stay low, with the possible exception of petrochemical producers.
“It seems to me that the spending will continue in the Gulf…There are plenty of stocks in the Gulf and neighbouring regions offering huge dividend returns that will likely be the stars of next year in (hopefully) a less volatile manner,” said Emad Mostaque, strategist at Ecstrat, an emerging markets consultancy.
He added, “Governments will look to deploy their assets more aggressively to increase yields rather than hold them in T-bills, which predictably will be in real estate initially, which should support the UAE market in particular.”
Dubai’s index jumped 2.6 percent to 3,987 points as most stocks gained. The benchmark rose briefly above the psychologically important 4,000 point mark but then gave up some of its gains.
Shares in retail start-up Marka surged 12.0 percent after it said it had agreed to buy sporting goods retail firm Retailcorp from Dubai World for over 220 million dirhams ($60 million). The move will make Marka, which listed this year, operationally profitable in 2015, it said.
Abu Dhabi’s index rose 1.3 percent on the back of blue chips such as National Bank of Abu Dhabu and First Gulf Bank, up 1.1 and 2.1 percent respectively.
Qatar’s bourse rose 1.5 percent. Property firm Ezdan Holding was the main support, surging 6.0 percent, while conglomerate Industries Qatar added 1.5 percent.
Outside the Gulf, Egypt’s bourse moved little as key stocks were mixed and Commercial International Bank , the biggest listed entity, was flat. Trading volume remained low compared to levels seen in the last few months.-Reuters