Editor’s Note
The Jadwa Investment firm in Riyadh introduced the “Saudi Chartbook” last month which provides a quick, chart-based briefing on the key developments and trends in the Saudi economy and stock market for the past month. SUSRIS is pleased to provide the summary from the March Saudi Chartbook and a link to the complete report. SUSRIS thanks Jadwa Investment’s Chief Economist, Brad Bourland, and Head of Research, Paul Gamble, for providing this insightful product for your consideration.
Saudi Economic Trends – Jadwa Chartbook – March 2010
Real economy: Economic data for January are consistent with a gradual improvement in the economy. Constrained credit availability continues to prevent the private sector from fully benefitting from the recovery, but greater government spending is trickling down.
Inflation: Inflation dropped for the first time in three months in January. This was against our expectations. While food prices were up, as forecast, this was offset by declines elsewhere. We continue to expect inflation to rise over the next few months.
Oil: Oil prices have remained in the $7080 per barrel range as the countervailing forces of rising demand and higher nonOpec supply offset one another. Opec is not expected to change production quotas at its meeting later this month.
Exchange rates: The dollar continued to strengthened over the past month. Growing concerns about the threats to the global economic recovery have increased risk aversion and encouraged flows into dollar assets considered as safe havens.
Remittances: A strengthening dollar is enhancing the attractiveness of work in the Kingdom and could contribute to a further increase in the employment of expatriates. Data from Pakistan (the only country to provide a detailed breakdown) shows further growth in 2010.
Stock market: The TASI moved little in low volumes in February and early March. While earnings were reasonable, the confidence of investors remains subdued in the absence of clear triggers for them to return to the market. As a result, a planned IPO was pulled.
Sector performance: Eleven of the 15 sectors were up in February. Cement was the best performing sector in response to alltime high sales in January. Insurance was the worst performer as a result of some Sharia scholars questioning the business model used.
Volumes: Stock market volumes have remained low. Data suggest that interest from Saudi retail investors (who dominate the market) may be waning. A number of IPOs scheduled for the next few months could help to revive activity.
Volatility: The TASI has been remarkably stable over the past month. Volatility has dropped in other global developed and emerging markets, but not to the extent as in the Kingdom. This is probably because of the continuing lack of retail investors.
Correlation: The close correlation between the TASI and leading global and emerging markets that was established during the financial crisis has weakened. This may be a sign that investors are focusing more on local rather than global fundamentals.
For comments and queries please contact the authors:
Paul Gamble, Head of Research – pgamble@jadwa.com and Gasim Abdulkarim, Associate Director: Research – gabdulkarim@jadwa.com or: Brad Bourland, CFA, Chief Economist- jadwaresearch@jadwa.com
Head office:
Phone +966 1 2791111
Fax +966 1 2791571
P.O. Box 60677, Riyadh 11555
Kingdom of Saudi Arabia
http://www.jadwa.com
COMPLETE REPORT
About Jadwa Investment – Jadwa Investment is a Saudi Closed Joint Stock company operating under the supervision of the Saudi Arabian Capital Markets Authority (CMA). Under the CMA decision published on August 21, 2006, Jadwa was awarded a license to offer all types of investment services including dealing, managing, custody, arranging and advising. All investment services offered by Jadwa Investment are supervised by a Shariah Supervisory Board and are fully Shariah-compliant.
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