Gulf News

Oil denies Saudis regional stock market crown

Total market capitalisa­tion of the South African bourse was $489b as of Friday

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Oil has denied Saudi Arabia the opportunit­y to overtake South Africa as the biggest stock market in the Middle East and Africa, even as political turmoil and a faltering economy hold back share prices in Johannesbu­rg.

The total market capitalisa­tion of the South African bourse was $489 billion (Dh1.79 trillion) as of Friday, about $25 billion more than that of Riyadh’s after its main index advanced 10 per cent this year, about five-times the gain in Saudi Arabia’s Tadawul All Share Index. The kingdom’s market reforms, which were designed to attract foreign investors, have been countered by the effects of lower oil prices, its main source of income.

“While South Africa politics is improving a bit and the economy is now out of recession, oil prices haven’t gone up,” said Didier Rabattu, the head of equities at Lombard Odier Asset Management in Geneva, who manages a $920 million emerging-markets equities fund. “And Saudi Arabia’s inclusion to MSCI Emerging Markets is still pretty remote.”

Saudi Arabian shares erased losses for the year in June when index compiler MSCI Inc. said the country could potentiall­y be classified as an emerging market next year, a move that would trigger billions of dollars of inflows. FTSE Russell is expected to announce at the end of this month whether it will add the kingdom to its emerging-market category.

Share in both countries have lagged an MSCI’s index for developing nations, which has climbed 27 per cent this year. While Johannesbu­rg’s benchmark has outperform­ed Saudi Arabia’s, its performanc­e has been hindered by an economy that dipped briefly into recession and as investors await the selection of President Jacob Zuma’s successor as leader of the ruling party in December.

Another factor keeping the combined value of Johannesbu­rg stocks ahead of Riyadh’s in dollar terms is foreign exchange: while the Saudi riyal is pegged against the greenback, the rand has strengthen­ed 6.3 per cent this year to 12.9291 per dollar.

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