DUBAI: Gulf stock markets were soft early yesterday after oil prices and global bourses pulled back, while Saudi Arabia edged down despite the Saudi regulator’s announcement that it would ease restrictions on foreign investment sooner than expected. The Saudi index fell 0.3 percent in the first 75 minutes of trade with most banks and many second-tier stocks weak, though Arabian Pipes, a supplier to oil giant Saudi Aramco, jumped 4.9 percent in unusually heavy trade.
The Capital Market Authority said late on Wednesday that it would relax curbs on foreign institutional investors on Sept. 4, sooner than the mid-2017 deadline previously indicated. Among the reforms are a much lower minimum assets-under-management requirement for foreign institutions, and an easing of restrictions on foreign ownership of individual shares. But while fund managers say the changes are good news, they believe there may not be any sudden increase of foreign fund inflows into Saudi Arabia, given the economic slowdown there.
Over the long term, the reforms are expected to help persuade international index compiler MSCI to add Saudi Arabia to its emerging markets index, would would attract billions of dollars of fresh foreign money to the kingdom. But EFG Hermes said in a note yesterday that it still thought May 2019 was the earliest inclusion date for Saudi Arabia in the MSCI index and that it was too early for investors to position themselves for foreign fund inflows.
EFG remains underweight on Saudi equities "given the continued domestic liquidity crunch, weak economic and earnings growth outlook, and continuing uncertainty about the sustainability of earnings until the subsidy removal timeline becomes clearer,” the investment bank said. No Saudi stocks are currently close to hitting their old, pre-reform ceilings for foreign institutional ownership, although petrochemical company Alujain has an unusually high percentage of 4.1 percent.
Its shares jumped 4.8 percent yesterday morning. Elsewhere, Abu Dhabi’s index dropped 0.9 percent as Waha Capital sank 2.5 percent after it reported a 22 percent year-on-year drop in second-quarter net profit because of lower income from financial investments and higher costs. Dubai’s index edged down 0.1 percent as construction firm Arabtec, which is expected to announce second-quarter earnings on Sunday, dropped 1.3 percent and was the most heavily traded stock. Qatar fell 0.4 percent as Dlala Brokerage, the most heavily traded stock, lost 1.0 percent. It reported an 808,000 riyal ($222,000) profit for the second quarter, swinging from a 23.4 million riyal loss a year ago. — Reuters