Saudi Stocks Join Gulf Advance as Foreigners Get Access to IPOs

EghtesadOnline: Saudi Arabian stocks joined gains across most Gulf equities after the kingdom said it would let foreign investors take part in initial public offerings, boosting overseas access to the Middle East’s largest exchange.

News ID: ۷۳۶۰۵۵

21 August 2016

The Tadawul All Share Index added 0.1 percent at 12:16 p.m. local time, its second straight advance. Abu Dhabi’s ADX General Index also rose 0.1 percent and Bahrain’s BB All Share Index climbed 0.3 percent. The Bloomberg GCC 200 Index, a gauge of the largest and most liquid companies in the six-nation Gulf Cooperation Council, increased 0.1 percent, reports Bloomberg.

Saudi Arabia’s Capital Market Authority approved regulations on book-building in IPOs that include qualified foreign investors, according to a statement posted on the regulator’s website after the end of trading on Thursday. The kingdom is adopting a series of measures to increase international participation in one of the world’s most restricted exchanges following a halving of oil prices in the past two years.

“News from Thursday shows that the market will be a lot more open for international investors, and with oil prices up, it’s creating some positive sentiment,” said Muhammad Faisal Potrik, the Riyadh-based head of research at Riyad Capital. “Overall, stock prices are pretty attractive at these levels, especially banks, and I think that’s why people are investing right now.”

Brent crude capped its strongest weekly increase in five months on Friday, as investors weighed speculation that OPEC talks next month will lead to an output freeze. It has climbed more than 20 percent since it dipped below $40 a barrel earlier in the month, meeting the common definition of a bull market.

Saudi Valuations

Saudi equities are trading at about 12.2 times expected earnings, according to data compiled by Bloomberg. That’s near the lowest valuation in four months, down from more than 16 times in June 2015. In addition to the IPO rules, which take effect from Jan. 1, regulations coming into force next month cut the amount of assets foreigners must have under management to invest directly in the nation’s stocks to 3.75 billion riyals ($1 billion) from 18.75 billion riyals.

Insurance companies Wataniya Insurance Co., Gulf General Cooperative Insurance Co. and ACE Arabia Cooperative Insurance Co. were the biggest gainers on a percentage basis on Sunday, each climbing at least 4.2 percent. Saudi Basic Industries Corp., one of the world’s biggest petrochemicals manufacturers, was the largest contributor to the index gain.

Kuwait’s SE Price Index slipped 0.2 percent and Dubai’s DFM General Index declined 0.4 percent.