Investors will look to Saudi Arabia this week as the earnings-reporting season has got off to an encouraging start on the region's biggest bourse. Companies including the dairy and food producer Almarai, the property developer Dar Al Arkan, and Yanbu Cementposted profit increases yesterday.
"People are more conservative rather than risk-takers at the moment due to volatility on international, particularly European, markets," said Marwan Shurrab, the vice president and chief trader at Gulfmena Investments, an asset-management firm in Dubai.
Yanbu Cement reported a 44 per cent rise in second-quarter profit from a year earlier to 216 million riyals amid greater output and higher revenue.
"The cement sector has always been attractive. Investors believe in the short term it's a hedge from volatility in global markets," said Hisham Tuffaha, the head of asset management at Bakheet Investment Group in Saudi Arabia."Cement stocks grew by 16 per cent so far this year, versus 6 per cent for the benchmark."
Dar Al Arkan posted an 11 per cent rise in profit in the second quarter on the back of higher property sales. Net income advanced to 331m riyals from 297.8m in the same period last year. Seven out of a total 152 publicly listed companies have reported so far.
"Everyone is waiting for the big banks to report, which will be the engine for the market," Mr Tuffaha said. "So far, the ones that have reported have not been large-cap stocks, with the exception of Dar Al Arkan."
The Tadawul All-Share Index rallied 2.6 per cent from Monday to Tuesday to trade at 6,885.27 points after the kingdom approved a long-awaited law providing for mortgage lending.
King Abdullah in March last year ordered authorities to build 500,000 low-cost homes by 2014 to keep up with the demands of a population that has quadrupled in 40 years. Property stocks and banks with large retail operations all jumped last week.
Emaar Economic Citysoared 9.3 per cent from Monday to Tuesday to trade at 9.75 riyals a share, while Saudi Real Estate gained 8.3 per cent to trade at 27.20 riyals.
This week, a new entrant will list on the Tadawul exchange.
Saudi Airlines Catering will start trading tomorrow after the food company raised 1.3 billion riyals last month in an initial public offering, according to a statement posted on the bourse website.
Saudi Arabia's stock market rallied 24 per cent in the first quarter of the year amid speculation that the country was considering allowing foreign investors to buy shares of companies listed on the local exchange. But the index lost steam in the second quarter, shedding nearly half of the gains, amid a lack of strong signals that an opening up of the Tadawul was imminent.
Elsewhere in the region, Kuwait's index ticked 0.1 per cent higher to 5,861.15 points last week as the country's political crisis showed no signs of improvement.
Sheikh Jaber Mubarak Al Hamad Al Sabah was reappointed as prime minister four days after he resigned, while opposition parties remained sharply at odds in parliament and government. Parliament was dissolved last month after the constitutional court nullified elections held in February.
"A continuation of the current political turmoil will put the brakes on both investment and economic reforms over the next two years or so," Said Hirsh, a Middle East economist at Capital Economics, said in a report last week. "We don't think that GDP growth will average more than 3 per cent a year in the next three years, compared to over 6 per cent over the past decade."
In the Emirates, the Abu Dhabi Securities Exchange General Index gained 0.5 per cent over the course of last week to close at 2,472.27, while the Dubai Financial Market General Index rose 2.8 per cent over the period to 1,504.70.
Bahrain's index added 0.1 per cent to finish the week at 1,121.89, Oman's MSM 30 Index fell 1.4 per cent to 5,577.29, and Qatar's QE Index gained 0.5 per cent to 1,992.91 points.
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