Saudi Arabian Stocks Drop on Land Tax Concerns; Israel Climbs

Saudi Arabian stocks declined to the lowest in two months on investor concern that a proposed land tax may lower profit at banks and real estate companies. Israeli shares rose.

The Tadawul All Share Index fell 1.4 percent to close at 7,276.26. Al Rajhi Bank, which has the heaviest weighting on the gauge, was the biggest contributor to losses after it retreated 2.3 percent to the lowest in more than seven weeks. Israel’s TA-25 Index advanced 2.3 percent, the most in two months. The DFM General Index climbed 0.3 percent.

The Saudi government plans a tax on white land, or plots that remain undeveloped for years, to help tackle a housing shortage. While the measure will boost government revenue, it will impact banks that use these plots as collateral for loans. The proposed fine comes at a time when the slump in the price of oil, the kingdom’s biggest source of revenue, led to a drop in deposits and a rise in borrowing costs.

“The structural reforms in Saudi real estate are the reason for the declines in the market today,” said Mazen Al-Sudairi, the Riyadh-based head of sell-side research at Alistithmar Capital, a unit of Saudi Investment Bank. The market “is trying to make some discounts regarding real estate and that is affecting the banking sector,” he said.

Stocks in Abu Dhabi, home to almost 6 percent of the world’s proven oil reserves, also fell after banking shares declined. An almost 45 percent drop in Brent crude prices in the past 12 months has hurt profit in Gulf nations, which rely on income from oil to fund public spending. The ADX General Index lost 0.3 percent.

Union National Bank PJSC’s third-quarter net missed analyst estimates by more than 10 percent. The lender’s stock led the index’s decline with a 3.8 percent retreat, the steepest in two months.

Risky Assets

Stocks in other parts of the Arab world benefited from a renewed appetite for riskier assets after central banks in Europe and China took measures to shore up the global economy. Egypt’s EGX 30 Index rose 0.6 percent, and Qatar’s QE Index, and Kuwait’s stock gauge advanced 0.5 percent each. Oman’s MSM 30 Index gained 0.3 percent.

The rise in stocks “is largely on the back of developments in the international markets,” said Muhammad Shabbir, who manages about $550 million as the head of regional equities at Rasmala Investment Bank Ltd. in Dubai. “They had some positive momentum on Thursday and Friday.”

Equities worldwide rose last week after China’s central bank cut interest rates and European Central Bank President Mario Draghi signaled that he will bolster stimulus if needed amid signs of slowing global growth and tepid inflation. Investors are betting that central banks worldwide, including the U.S. Federal Reserve, will continue to support low-rate environments. The Standard & Poor’s 500 Index and the MSCI Emerging Market Index both rose the fourth consecutive week on Friday.

Teva Rises

Israel’s TA-25 Index advanced 2.3 percent to 1,580.33, led by Teva Pharmaceutical Industries Ltd.’s 5.9 percent jump, the most in almost three months. The equity gauge was near the upper Bollinger band, a bullish indicator for some technical analysts.

TA-25 Index Trades Near Upper Bollinger Band
TA-25 Index Trades Near Upper Bollinger Band

Teva’s American deposit receipts rose 6.4 percent on Friday after the company said it launched a $22.5 billion bridge loan for its acquisition of Allergan Plc. The stock fell 3.4 percent a day earlier.

“The selloff on Teva was overdone," said Gilad Alper, a senior analyst at Excellence Nessuah Brokerage based in Petach Tikva, near Tel Aviv. “There were several issues weighing on the share, such as politicians arguing that the pharma industry is charging too much money for drugs and that Teva is raising a whole lot of money to finance the Allergan deal, but the fundamentals are strong, the sector is growing and the Allergan acquisition should bear fruit in the not-so-distant future.”

Israel’s oil and gas explorers climbed to the highest in almost two months on bets the nation’s natural gas policy will be approved after a cabinet reshuffle by Prime Minister Benjamin Netanyahu. Nearly a year of wrangling has delayed development of Leviathan, Israel’s largest offshore field, in which U.S.-based Noble Energy Inc. and Israel’s Delek Group Ltd. hold stakes.

“If the prime minister manages to take the economy ministry so that he can sign off on the natural gas framework, which he’s been driving at for about six months, it would be very significant for the companies,” said Meir Slater, the head of research at Bank of Jerusalem Ltd. in Tel Aviv. “It could finally unfreeze the entire sector and allow the explorers to develop their fields, extract the gas from the ground and then sell it in the market.”

The TA-Oil & Gas index gained 1.8 percent to the highest since Aug. 30. Delek Group shares rose 3.8 percent to 986.60 shekels.

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