Saudi Stocks Extend Best Rally in Year on Government Cash Boost

  • Adeem Capital, Mena Corp. see more gains in store for Tadawul
  • Insurance companies dominate top 10 movers in the past 5 days

Saudi Arabian stocks extended their longest winning streak in a year on optimism proceeds from the government’s record bond sale will alleviate strain on the slowing economy.

The Tadawul All Share Index climbed 7.7 percent in the past five days to 5,882 by the close in Riyadh, trimming losses that made it the third worst-performing equity benchmark worldwide this year. Insurance companies were among the biggest beneficiaries of the rally, with a gauge including 35 of the firms rallying 10 percent.

The kingdom raised $17.5 billion in a debut Eurobond sale on Oct. 19 that surpassed any other from an emerging-market sovereign, giving the government cash to help cover the hole in its budget caused by depressed oil prices. The same day, Finance Minister Ibrahim Al-Assaf said the country was repaying outstanding debts to contractors after long delays.

“This a positive momentum building up slowly right after announcements last week, and the success of the Saudi Eurobond sale,” said Mohammed Alsuwayed, the Riyadh-based head of capital and money markets at Adeem Capital. “We’re looking at a nice rebound that can go as high as 6,000 level if there is no new bad news.”

Of the 10 best-performing stocks in Saudi Arabia in the past five trading days, seven were insurance or health-care companies, according to data compiled by Bloomberg. The insurance index became cheaper than the main gauge for the first time in five months in September after the nation announced a series of austerity measures that pushed equities into a bear market.

“The fundamentals are a bit better after the recent bond sale,” said Hisham Khairy, the head of institutional trading at Mena Corp. Financial Services in Dubai, who sees the Tadawul testing 5,950 and then 6,350.

Insurers and healthcare companies were trading at about 11.8 times future earnings on Tuesday, compared with 11.6 times for the main gauge. Earlier in October, the multiple for insurers dropped to as low as 10.1. The Tadawul climbed 1.5 percent on Tuesday, bringing the advance in October to 4.6 percent, on course for the first monthly gain since June.

“The selloff over the last month was unjustified,” said Tarek El-Shawarby, a Cairo-based healthcare equities analyst at EFG-Hermes Holding who expects buying momentum to boost hospital operators in the coming days.

The following 10 companies have gained the most in the five-day rally:

Trade Union Cooperative Insurance27%
Al Khaleej Training And Education Company27%
Al-Rajhi Company for Co-Operative Insurance26%
Al Hammadi Development and Investment23%
Al Tayyar Travel Group21%
Aldress Petroleum and Transport21%
Solidarity Saudi Takaful20%
Salama Cooperative Insurance20%
Middle East Healthcare19%
Sabb Takaful19%
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