Banking shares lift Saudi bourse

DUBAI: Most major stock markets in the Gulf rose on Wednesday. Saudi Arabia’s banks rose on expectations of a US interest rate hike.

“Higher interest rates mean higher net interest margins and with the economy now coming off a slowdown and with better liquidity levels in the market, banking shares have performed well today,” said a Riyadhbased fund manager.

Saudi Arabia tends to follow US interest rate moves because its currency is pegged to the dollar. Nine of the 12 listed lenders rose, helping lift the Tadawul All Share Index (TASI) 0.5 percent.

In terms of valuations, banks are trading at a slight discount to the Saudi market and are considered cheap when compared to their regional counterparts, according to analysts at HSBC.

They said Saudi banks would also be important financial intermediaries in Riyadh’s privatization program, which is at the center of the Saudi economic reform plans.

“If 70 to 100 percent of such volumes are funded by the banks over a three-year period, sector loan growth could improve by 7 to 9 percentage points,” said HSBC.

National Commercial Bank rose 2.9 percent to SR44 ($11.73). HSBC rates the stock a “buy” with a target of SR47.

Abu Dhabi’s index was almost flat as Dana Gas fell 1.4 percent in heavy trade. The stock had surged 15 percent on Tuesday when Dana proposed restructuring its $700 million of outstanding Islamic bonds at much cheaper rates and without the option of converting to shares. On Wednesday, it said it had obtained an injunction in a Sharjah court blocking claims on its existing sukuk.

Dubai’s index rose 0.3 percent as theme park operator DXB Entertainments, which has been hit by disappointing visitor numbers at its parks, climbed 5.5 percent after announcing a new management structure.

It said strategy and business development would be incorporated into a newly structured finance function, and appointed a new chief financial officer, John Ireland, who was previously CFO at Arab Media Group.

Egypt’s index edged down 0.2 percent; private equity firm Qalaa Holdings fell 2.4 percent.