Editor’s Note:
The Jadwa Investment firm in Riyadh introduced the “Saudi Chartbook” in February which provides a quick, chart-based briefing on the key developments and trends in the Saudi economy and stock market for the previous month. SUSRIS is pleased to provide the summary from the June Saudi Chartbook and a link to the complete report which is rich with illuminating charts and graphs. SUSRIS thanks Jadwa Investment’s Chief Economist, Brad Bourland, and Head of Research, Paul Gamble, for providing this insightful product for your consideration.
[Complete report with charts, graphs and tables at this link.]
Saudi Economic Trends – Jadwa Chartbook – June 2010
Saudi Economic Trends – Jadwa Chartbook – June 2010
Summary
Real economy: Data for April suggest that the pace of economic activity slowed slightly, though it continues to run well ahead of the same point of last year. Economic growth in 2009 has been revised up and now shows a stronger contribution from the private sector.
Bank lending: Bank lending to the private sector was up again in April despite a fall in deposits. Low interest rates continue to encourage customers to withdraw money from savings deposits, with demand deposits now accounting for more than half of total deposits.
Inflation: Inflation rose further in April, largely due to higher food prices. The impetus from higher food prices is expected to fade in the next few months and with rental inflation easing on an annual basis, it is likely that inflation is close to its high for the year.
Trade: Private sector appetite for imports remained strong, though this has yet to be reflected in the actual import data (the most recent numbers are from February). Nonoil exports have risen strongly from their lows in recent months.
Oil: Oil prices have recovered some ground in the last few days after plunging earlier in the month as problems in the eurozone raised concerns about a slowdown in oil demand. Early surveys suggest that Opec oil production rose in May.
Exchange rates: The dollar strengthened against virtually all currencies over the past month, as global appetite for risk collapsed owing to fallout from debt problems in the eurozone. The gain versus the euro was among the sharpest, though the single currency has stabilized in recent weeks.
Stock market: The TASI plunged during May in response to turbulence on global markets and falling oil prices. All the gains for the year have been wiped out despite a strong bounce from an 8month low hit toward the end of the month.
Relative performance: Although we think the Saudi economy will be relatively unscathed by the ongoing global turmoil, the TASI has underperformed several of the leading global stock markets over the past month.
Sectoral performance: All 15 sectors declined in May. The plunge in petrochemicals had a particularly large impact on the market as it is the largest sector by capitalization.
Listed company borrowing: Outstanding longterm debt of listed companies totaled SR335 billion at the end of the first quarter. New borrowing has slowed in recent years because of reduced funding needs and financing from local banks becoming less accessible.
Real Economy
Data for April suggest that the pace of economic activity slowed slightly, though it continues to run well ahead of the same point of last year. Economic growth in 2009 has been revised up and now shows a stronger contribution from the private sector.
Bank Lending
Bank lending to the private sector was up again in April despite a fall in deposits. Low interest rates continue to encourage customers to withdraw money from savings deposits, with demand deposits now accounting for more than half of total deposits.
Inflation
Inflation rose further in April, largely due to higher food prices. The impetus from higher food prices is expected to fade in the next few months and with rental inflation continuing to ease on an annual basis, it is likely that inflation is close to its high for the year.
Trade
Private sector appetite for imports remained strong, though this has yet to be reflected in the actual import data (the most recent numbers are from February). Nonoil exports have risen strongly from their lows in recent months.
Oil
Oil prices recovered some ground in the last few days of May after plunging earlier in the month as problems in the eurozone raised concerns about a slowdown in oil demand. Early surveys suggest that Opec oil production rose in May.
Exchange Rates
The dollar strengthened against virtually all currencies over the past month, as global appetite for risk collapsed owing to fallout from debt problems in the eurozone. The gain versus the euro was among the sharpest, though the single currency has stabilized in recent weeks.
Stock market
The TASI plunged during May in response to turbulence on global markets and falling oil prices. All the gains for the year have been wiped out despite a strong bounce from an 8 month low hit toward the end of the month.
Relative performance
Although we think the Saudi economy will be relatively unscathed by the ongoing global turmoil, the TASI has underperformed several of the leading global stock markets over the past month. This probably reflects uncertainty among retail investors, who dominate trading.
Sectoral performance
All 15 sectors declined in May. The plunge in petrochemicals had a particularly large impact on the market as it is the largest sector by capitalization. Banks was one of the better performers, reflecting limited exposure to troubled eurozone countries.
Listed company borrowing
Outstanding longterm debt of listed companies totaled SR335 billion at the end of the first quarter. The pace of borrowing has slowed in recent years because of reduced funding needs and financing from local banks becoming less accessible
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 with charts, graphs and tables at this link.]
Saudi Economic Trends – Jadwa Chartbook – June 2010
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.
Related Material:
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- Vulnerability to European “Shockwaves” – Sfakianakis – SUSRIS – May 17, 2010
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- Jadwa Investment April 2010 Bulletin – SUSRIS – Apr 28, 2010
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- Saudi Economic Trends – Jadwa Chartbook – April 2010
- Saudi Stock Market Report – Jadwa Investment – SUSRIS IOI – Mar 21, 2010
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- Jadwa Investment – Home Page
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