Investors take long view on Saudi-US deals

The market is awaiting details about the agreements and the outcome of the Opec meeting in Vienna.

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Riyadh // The Saudi market’s reaction to billions of dollars worth of deals signed between the United States and Saudi Arabian public and private companies was muted yesterday, as investors await concrete steps on implementing these agreements, which also focus on creating jobs locally.

The Saudi stock market and other Arabian Gulf exchanges closed almost flat yesterday, ahead of an Opec meeting this Thursday and as the pre-Ramadan lull sets in. The Saudi Tadawul All Share Index closed little changed at 6,987.65.

“The Saudi market is very much connected to the oil prices more than any other market in the GCC,” said Mohammed Yasin, the managing director at National Bank of Abu Dhabi Securities.

“The Opec meeting now with non-Opec [producers] will be the focus point.”

Opec meets in Vienna on May 25 to decide whether to extend a cut in global oil output into the first quarter of next year to help rid the market of excess supply.

Saudi Arabia has said all Opec members are on board for the nine-month extension of the deal into the first quarter of next year.

Opec and 11 countries led by Russia agreed to cut 1.8 million barrels of oil a day from the market for a six-month period starting January to help bring down oil inventories to their five-year balance.

The Saudi market, which rose 0.75 per cent on Sunday one day after a number of the US-Saudi deals were signed, did not react significantly to the agreements because they do not have an immediate economic impact, according to analysts. Year-to-date, the Saudi market has fallen 3 per cent.

“I believe these contracts that have been signed, they are long term and the effects are long term,” Mr Yasin said. “The impact will not be felt in a day or two economically.”

Saudi investors also need clarity on the deals, many of which were just in the form of memorandums of understanding and letters of intent rather than solid agreements.

The Saudi stock market, like other Gulf markets, is also entering the Ramadan period, which is marked by thin trading and little investor interest.

International index compiler MSCI is expected to decide next month whether to review Saudi Arabia for possible inclusion in its Emerging Market Index, a move that could help attract foreign investment to the market. Rival index compiler FTSE is also mulling whether to upgrade Saudi Arabia from a secondary emerging market.

MSCI has welcomed reforms undertaken by the Saudi stock market, or Tadawul, which include extending the settlement cycle of trades to two-working days from same-day settlement. The Tadawul has also introduced short selling.

Elsewhere in the Gulf, the UAE markets were also subdued. Dubai rose 0.11 per cent, while Abu Dhabi fell 0.41 per cent.

“Markets [in the UAE] are generally moving sideways,” said Mohammed Shabbir, equity analyst. “There is no big catalyst in the market. Earnings season is over and we are just about to enter Ramadan and this period is usually slower than expected.”

Qatar rose 0.52 per cent, while Oman closed up 0.11 per cent and Bahrain was flat. Kuwait was up 0.21 per cent.

dalsaadi@thenational.ae

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