Tadawul gains on budget expectations

Saudi Arabia’s stock market surged yesterday as cement firms climbed before the release of the government’s 2018 budget, which is expected to include an increase in infrastructure spending.

The Saudi stock index surged 1.4 per cent in active trade. Five of the 10 most heavily traded shares and six of the 10 top gainers were cement firms, with Najran Cement jumping 6 per cent after a 4.5 per cent gain on Sunday.

Analysts generally expect a moderate increase in spending in the 2018 budget and for deficit-cutting to slow considerably as the government focuses more on supporting growth; infrastructure spending may rise after two years of austerity.

This looks unlikely to produce a strong economic recovery next year, given the introduction of 5 per cent value added tax at the start of next month and the government’s plan to announce fuel price hikes in 2018.

Although King Salman last week approved 72 billion Saudi riyals worth of measures to stimulate growth in the private sector, only 24bn riyals of that is to be spent in 2018, a Saudi official said.

Much of the money will be in the form of soft loans extended by state funds; this strategy has had limited success in Saudi Arabia in the past, as many private companies have remained reluctant to borrow the money or commit to projects.

Nevertheless, the construction industry could start to recover; accelerating housing construction is one of the government’s priorities. Shaker, which as an air conditioner and appliance distributor could benefit from faster home building, rose 1.4 per cent yesterday.

In Dubai, the index was flat in very quiet trade. Abu Dhabi climbed 1.1 per cent as Adnoc Distribution, which listed last week after an IPO at Dh2.50, was the most heavily traded stock and climbed 2.6 per cent to Dh2.74.

Egypt’s blue-chip index was almost flat. Alexandria Mineral Oils climbed 5.5 per cent after saying its profit for the latest quarter jumped more than fourfold from a year earlier.

Egypt Gas, which handles natural gas engineering and maintenance work, soared 10 per cent, rising sharply for a third straight day.

Markets in Qatar and Bahrain were closed for public holidays.