Gulf markets slip despite oil gains

A Saudi investor monitors the bourse at the Al-Bilad Saudi Bank in Riyadh on Monday. A negative factor for the broader Saudi market yesterday was the absence of any significant fund inflows from abroad since the bourse opened to direct foreign investment on Monday.

Reuters/DubaiMost Gulf bourses slipped yesterday, despite higher oil prices, as some local retail investors stepped back from the markets with the beginning of the holy month of Ramadan. Saudi Arabia’s main index edged down 0.4% and Al Rajhi Bank, down 1.0%, was the main drag on the benchmark. Al Rajhi, a leading retail lender which accounts for a large share of Saudi Arabia’s interest-free deposits, had risen 3.0% this week as investors bet on a hawkish statement by the US Federal Reserve after its policy meeting. Higher US interest rates, which Saudi Arabia would have to match because its riyal is pegged to the dollar, could boost the profit margins of lenders like Al Rajhi. But the Fed on Wednesday lowered its forecasts for 2015 US economic growth because of a weak start to the year and reduced its federal funds rate forecast. A negative factor for the broader Saudi market was the absence of any significant fund inflows from abroad since the bourse opened to direct foreign investment on Monday. The latest stock exchange data showed foreign institutions made no significant investments on Wednesday. According to Reuters calculations based on the data, foreigners in total bought a mere $3mn of local stocks directly between Monday and Wednesday, although some additional inflows may not have been registered in the data because they were too small. Only one institution, HSBC, has so far publicly announced that it obtained a licence to invest directly from the kingdom’s Capital Market Authority. The regulator itself has not announced any licence awards, but Saudi Arabian newspaper Okaz quoted a CMA official as saying on Wednesday that it would start publishing regular reports on approvals of applications “soon”. High valuations of Saudi stocks compared to global averages, operational issues such as a requirement for same-day settlement, and the fact that it is expected to be at least two years before Saudi Arabia joins major global equity indexes have all limited foreign interest. Dubai’s index fell 0.6%, as heavyweight Emaar Properties slid 1.0% after its Egyptian subsidiary Emaar Misr priced its initial public offer at 3.8 Egyptian pounds per share. It had said the offer would be priced at between 3.5 and 4.25 pounds per share. Mortgage lender Amlak Finance, which is also part-owned by Emaar, was one of the most traded stocks, tumbling 4.4%. The stock had more than doubled in price on speculative buying after it resumed trading this month following a six-year suspension, but now investors appear to be closing their positions. Most other Gulf markets also slipped, with the exception of Qatar, which inched up 0.1%.Egypt’s index edged up 0.2% but the market showed a roughly equal split between gainers and losers. El Sewedy Electric, which said this week it had entered into an agreement to develop a 50 MW solar energy power plant, climbed 2.3%. Property firm SODIC fell 0.7% after announcing the resignation of its managing director Ahmed Badrawi, who had held the position since March 2013. The company said Badrawi was leaving of his own accord but did not elaborate. Kuwait’s index fell 0.5% to 6,237 points; Oman’s index lost 0.2% to 6,455 points, while Bahrain’s index was flat at 1,367 points.