Budget boosts Saudi, Rest of Gulf sluggish

MIDEAST STOCK MARKETS

Saudi Arabia’s stock market rose sharply yesterday in response to the release of the 2017 state budget, which includes an increase in government spending, while other major Gulf bourses were sluggish and Egypt retreated on profit-taking. The Saudi stock index added 1.5 percent to 7,191 points, nearing technical resistance on this year’s peak of 7,235 points, hit earlier this month. Trading volume rose to its highest in over a week.

Financial analysts generally welcomed the budget as balancing the need to continue cutting Saudi Arabia’s fiscal deficit with support for economic growth. But many said it would not avert a further slowdown next year from the 1.4 percent gross domestic product growth in 2016.

“We expect that the economy will continue to decelerate in 2017, dragged down by slower growth in the oil sector, while non-oil sector growth is expected to rebound but remain subdued,” Jadwa Investment said in a postbudget report. National Commercial Bank predicted the economy would contract by 1.0 percent in 2017 as Saudi Arabia cut oil output in line with an OPEC agreement, and that the non-oil sector would expand only 1.2 percent.

Nevertheless, utility Saudi Electricity jumped 8.7 percent after the government said in the budget it would raise domestic fuel and electricity prices by unspecified margins later this year.

The petrochemical sector was strong, rising 2.2 percent, after the government said it would not raise gas feedstock prices before 2019. A feedstock price hike in the 2016 budget squeezed some petrochemical producers’ margins. Construction firm Abdullah Abdul Mohsin AlKhodari and Sons gained 1.9 percent after the government pledged to raise infrastructure spending, said it had settled unpaid bills to the private sector, and promised to settle future bills within 60 days of receiving them. Construction was plagued by delays in recovering money from the government this year.

Zain Saudi rose 1.9 percent after saying it was in talks to sell its mobile transmitter towers to a consortium of TASC SAL and ACWA Holding. Rival Mobily edged down 0.2 percent after the United Arab Emirates’ Etisalat, which owns 27.4 percent of Mobily, said its management agreement with Mobily had expired and the companies would negotiate a new technical alliance.

Elsewhere in the Gulf, major markets moved little and trade was thin in the absence of foreign investors during the Christmas holidays. Dubai’s index edged up 0.2 percent in a broad-based rise although retail and hospitality firm Marka, which surged last week after news that its chief executive Nick Peel had resigned, fell back 3.1 percent. Abu Dhabi inched up 0.1 percent as Etisalat rose 0.6 percent. Qatar’s index fell 0.3 percent.

Egypt’s index dropped 1.4 percent as Orascom Telecom, the most heavily traded stock, pulled back 4.6 percent. But Arabia Cotton Ginning climbed 5.9 percent after its board approved splitting the company into two separate entities.