Saudi Basic Industries Corp. rose the most in three weeks, leading a gain in Persian Gulf stocks, as crude oil surged after U.S. lawmakers passed a budget bill, boosting the outlook for earnings growth.
Shares of the world’s largest petrochemicals maker advanced 1.4 percent, the biggest increase since Dec. 9, to 91.50 riyals at the 3:30 p.m. close in Riyadh. The stock was the biggest gainer in the Bloomberg GCC 200 Index of the most-liquid regional stocks, which gained 1 percent. Industries Qatar, the second-largest petrochemicals maker in the Middle East, climbed 2.2 percent to 158.5 riyals, the highest level since September 2008.
Crude oil rose as much as 1.8 percent to $93.44 a barrel as of 8:32 a.m. in New York today, according to data compiled by Bloomberg. U.S. lawmakers reached a deal to avert automatic tax increases and spending cuts that threatened growth in the world’s biggest economy.
“Middle Eastern petrochemicals’ sector earnings are most levered to the global growth outlook,” Digvijay Singh, a Dubai-based analyst at VTB Capital Plc, said. These companies have a “unique earnings profile” because margins are linked to both oil prices and the Asian growth story, he said.
Shares of Sabic fell 6.8 percent in 2012 as crude oil prices decreased 7.1 percent amid global growth concerns triggered in part by Europe’s debt crisis. The company may post a 14 percent decline in full-year profit to 25 billion riyals ($6.7 billion), according to the mean estimate of 13 analysts on Bloomberg. That compares with projected profit growth of 12 percent for 2013, according to the average estimate of 14 analysts on Bloomberg.
The bipartisan agreement in the U.S. breaks a yearlong impasse over how to head off $600 billion in tax increases and spending cuts taking effect today. A government gauge of China’s manufacturing showed a third month of expansion yesterday, a sign that the recovery in the world’s second-biggest oil consumer will extend to this year.
Thirteen of the 14 companies in Saudi Arabia’s Tadawul All Share Petrochemical Industries Index advanced today, with National Industrialization Co. jumping 2.3 percent and Sabic unit Saudi Kayan Petrochemical Co. increasing 2.9 percent.
Seventeen analysts recommend investors buy the shares of Sabic, while one has a hold rating on the stock, data compiled by Bloomberg show. Fourteen analysts recommend buying Industries Qatar shares, while one says hold, the data show.