Stocks in Saudi Arabia climbed to the highest level since January 2008 after the world’s top oil producer proposed shareholding caps as it prepares to grant foreign investors access to the bourse. Dubai’s gauge also rose.
The Tadawul All Share Index climbed 1.6 percent to close at 10,903.04. Banking stocks led the advance, with Alinma Bank surging 9.7 percent to the highest level on record. Al Rajhi Bank, the largest traded Islamic lender globally, rose 2 percent. Dubai’s DFM General Index climbed 1.1 percent.
Saudi Arabia, the Middle East’s biggest economy, is removing barriers to one of the world’s most restricted stock markets as the kingdom pursues a $130 billion spending plan to boost non-energy industries. The country’s bourse may be added to MSCI Inc.’s emerging-markets gauge by 2017 at the earliest, Sebastien Lieblich, executive director at MSCI Index Research, said in July. That may translate into about $35 billion to $40 billion of inflows, John Burbank, founder of Passport Capital LLC, wrote in an e-mail on Aug. 21.
“The market is definitely reacting positively to the news on Thursday of CMA putting out the draft of foreign ownership laws,” Mohammed al-Omran, a financial analyst and president of the Gulf Center for Financial Consultancy in Riyadh, said by telephone today. “The laws don’t seem to be too restricting and it will definitely appeal to many foreign investors.”
Investors from outside the six-nation Gulf Cooperation Council, looking for access to Saudi Arabia’s $745 billion economy, aren’t currently allowed to buy Saudi-listed shares directly, and instead access the market through equity swaps and exchange-traded funds. The kingdom’s Capital Market Authority may cap foreign ownership of a single stock to 49 percent, it said in plans posted on the Riyadh-based regulator’s website Aug. 21.
Alinma soared the most since March 2012 to 25.40 riyals. Al Rajhi rose to 73.64 riyals, the strongest since August 2013.
Saudi shares have gained 12 percent since July 22, when the regulator announced plans to open the market to foreigners, bringing the index’s advance this year to 28 percent. That compares with a 8 percent increase in the MSCI Emerging Markets Index in 2014 and a 24 percent jump in the MSCI GCC Countries Index. The Tadawul is one of the top 10 best performing gauges in dollar terms this year among more than 90 tracked by Bloomberg globally.
The Tadawul’s 14-day relative strength climbed to 91.6 today, the highest since March 2012. A level of 70 or above indicates to some analysts that securities are overbought and poised for a selloff. More than 140 of the regularly traded stocks in Saudi Arabia’s 167-member benchmark gauge traded above their 50-day moving average on Aug. 21, close to a record reached in May, according to data compiled by Bloomberg.
In Dubai, shares jumped to the highest since June 8 on speculation regional markets will attract more foreign investors after Saudi Arabia’s shareholding rules take effect next year.
Arabtec Holding Co., the United Arab Emirates’ biggest publicly traded builder, increased 3.8 percent to 4.43 dirhams. Union Properties PJSC added 3.7 percent to 2.25 dirhams, the strongest close in two months.
“Some of the foreign flows will spill over to the other regional markets,” Nayal Khan, head of institutional sales and trading at Naeem Holding brokerage in Dubai, said by phone today. “Saudi Arabia’s market won’t take liquidity away from regional markets.”
Abu Dhabi’s ADX General Index and Kuwait’s SE Price Index gained 0.6 percent each. Bahrain’s BB All Share Index rose 0.2 percent. Muscat’s MSM 30 Index was little changed while Qatar’s QE Index slipped 0.2 percent. The Iraq Stock Exchange General Index lost 1.7 percent, the most since Aug. 7.
Egypt’s benchmark EGX 30 Index bounced back from its first weekly decline since June, gaining 1.3 percent to 9,495.30, the highest since July 2008. Real-estate shares led gains, with the bourse’s property industry index climbing 2.6 percent. Talaat Moustafa Group Holding, the biggest publicly traded developer, rose 4 percent.
“After last week’s slight correction, investors are realizing the market may still be undervalued as the government proceeds with its economic growth plans,” Cairo-based Mohamed Ismael, equities trader at Naeem Holding, said by telephone. “It’s another round of gains led by real-estate, which is feeding into other sectors such as steel and cement and helping the index continue its uptrend.”
Egypt announced an $8.4 billion expansion of the Suez Canal this month, its biggest source of foreign currency behind remittances from Egyptians living abroad and tourism. The waterway reported today a 12 percent increase in July revenue to $482.2 million compared with a year earlier.
Israel’s TA-25 Index fell 0.5 percent to 1,372.12, the lowest level since July 10, as Israel’s Prime Minister Benjamin Netanyahu warned residents of the Gaza Strip to flee “facilities” used by Hamas. Teva Pharmaceutical Industries Ltd. led the decline with a 1.7 percent drop.
“Security concerns continue to weigh on sentiment,” Steven Shein, a trader at Psagot Investment House Ltd. in Tel Aviv, said by phone today.
The yield on Israel’s bonds due March 2024 decreased one basis point, or 0.01 of a percentage point, to 2.64 percent, according to data compiled by Bloomberg.