saudi stock market recovers from early losses as landmark budget gets mixed reaction
Last Updated : GMT 22:50:36
Arab Today, arab today
Arab Today, arab today

Saudi stock market recovers from early losses as landmark budget gets mixed reaction

Arab Today, arab today

Arab Today, arab today Saudi stock market recovers from early losses as landmark budget gets mixed reaction

The Tadawul All Share Index sank nearly 5 per cent on Tuesday
Riyadh - Arab Today

Saudi stocks recovered after a disastrous opening on Tuesday as investors digested details of the government’s landmark budget.

On Monday, the budget set deep cuts in capital spending for next year and reduced utility subsidies in an effort to deal with shrinking oil revenues.

The benchmark Tadawul All Share Index in Riyadh sank by nearly 5 per cent before recouping most of the losses to end 0.8 per cent lower at 6,930.60.

Around the region there was a similarly mixed reaction.

Both the main indexes in Dubai and Abu Dhabi posted small gains, with the Dubai Financial Market General Index closing up 0.4 per cent at 3,134.82 and the Abu Dhabi Securities Exchange General Index rising 1 per cent at 4,296.16.

Meanwhile, Bahrain and Kuwait indexes lost ground.

The Saudi budget had been well flagged but the cuts in energy subsidies were more unexpected.

The Saudi government said it planned to cut spending next year by 20 billion riyals (Dh19.58bn) to 840bn riyals, which would bring the deficit down to 326bn riyals from 367bn riyals this year.

With a slowing economy that would still mean the deficit would rise to 16 per cent of GDP from 15 per cent this year, although it would remain well below the IMF’s forecast of a 21 per cent budget shortfall.

While individual companies are seen as likely losers from the budget, the actions taken are widely seen as necessary to deal with the 70 per cent plunge since last year in the price of oil, which directly accounts for more than 70 per cent of Saudi government revenue.

“Overall, it is positive for the economy,” Nishit Lakhotia, the head of research at Securities & Investment Company in Bahrain, said of the budget cuts. “It shows they are controlling expenditures and reducing subsidies – that is, they are doing the structural reforms that everyone has been recommending given the prospect that oil prices are not likely to return to the levels we’ve seen between 2010 and 2014.”

The “landmark budget” signifies a positive change of direction for the Saudi government, according to Jean-Michel Saliba, regional economist at Bank of America Merrill Lynch.

“It likely marks the end of material overspending practices,” Mr Saliba says. Also, “it starts to introduce a credible medium-term fiscal consolidation strategy to address the oil price slump through revenue and expenditure measures, the first round of which saw sweeping energy, water and electricity administered price changes”.

The budget also underscored the Saudi government’s commitment to its energy and foreign exchange policy, he said.

Forward riyal/US dollar contracts had been rising sharply for weeks, despite assurances in September from the Saudi central bank chief, Fahad Al Mubarak, that the kingdom would not abandon the three-decades-old riyal-dollar peg.

The pressure on the riyal could be a harbinger of inflation, among other worries for the Saudi Arabian economy

But having jumped 250 points early on Tuesday to reach an eight-year high of 725 points, the forward riyal/dollar contract fell back to 620 late in the day as the government’s commitment to policy regained some credibility with traders.

Among the biggest losers on the day was Saudi Basic Industries Corporation (Sabic), the country’s dominant petrochemicals producer and one of the biggest in the world.

Sabic shares, which are the largest component in the Tadawul index at more than 7 per cent, ended down 4.5 per cent at 78.03 riyals.

Also posting losses was Saudi Electricity, down 5.7 per cent at 15.74 riyals, following a statement from the company making it clear that any gains it would make from the cut in energy subsidies would be offset by rising costs.

“It’s a double whammy for these companies,” said Mr Lakhotia.

“The petchem companies’ feedstock prices are definitely going up, also for gas-intensive industries. So, at one end they are having to face declining product prices at which they can sell, and at the other end their costs are going to increase. Profitability is going to get hit and there is more room for downside” in the share prices.

Big energy users, such as makers of cement, also reflect this squeeze. For example, Yanbu Cement was one of the day’s biggest losers, dropping 3.3 per cent to 43.74 riyals.

The budget squeeze had been largely factored into markets as the oil price slump set in.

The Tadawul has dropped from above 11,100 at the end of last year to a four-year low of 6,686.27 reached earlier this month.
Source: The National

arabstoday
arabstoday

GMT 14:54 2017 Sunday ,19 November

Bahrain Bourse daily trading performance

GMT 03:16 2017 Saturday ,18 November

Asian markets head for positive end to volatile week

GMT 11:57 2017 Friday ,17 November

US stocks boosted by solid Wal-Mart, Cisco earnings

GMT 06:51 2017 Friday ,17 November

Bahrain Bourse daily trading performance

GMT 03:57 2017 Thursday ,16 November

Stock markets retreat as oil slides

GMT 15:05 2017 Wednesday ,15 November

Bahrain Bourse daily trading performance

GMT 02:47 2017 Wednesday ,15 November

Asian markets down as fears grow for US tax reform

GMT 19:56 2017 Tuesday ,14 November

Bahrain Bourse daily trading performance
Arab Today, arab today
Arab Today, arab today

Name *

E-mail *

Comment Title*

Comment *

: Characters Left

Mandatory *

Terms of use

Publishing Terms: Not to offend the author, or to persons or sanctities or attacking religions or divine self. And stay away from sectarian and racial incitement and insults.

I agree with the Terms of Use

Security Code*

saudi stock market recovers from early losses as landmark budget gets mixed reaction saudi stock market recovers from early losses as landmark budget gets mixed reaction

 



Name *

E-mail *

Comment Title*

Comment *

: Characters Left

Mandatory *

Terms of use

Publishing Terms: Not to offend the author, or to persons or sanctities or attacking religions or divine self. And stay away from sectarian and racial incitement and insults.

I agree with the Terms of Use

Security Code*

saudi stock market recovers from early losses as landmark budget gets mixed reaction saudi stock market recovers from early losses as landmark budget gets mixed reaction

 



Arab Today, arab today
Arab Today, arab today Jordanian woman reveals her project

GMT 00:46 2017 Saturday ,11 November

Jordanian woman reveals her project
Arab Today, arab today Prince's vision spurs new Cornwall village

GMT 03:12 2017 Saturday ,18 November

Prince's vision spurs new Cornwall village
Arab Today, arab today Keep kids busy at Thanksgiving gatherings

GMT 11:14 2017 Friday ,10 November

Keep kids busy at Thanksgiving gatherings
Arab Today, arab today Israel ready to cooperate with Saudi

GMT 06:31 2017 Friday ,17 November

Israel ready to cooperate with Saudi
Arab Today, arab today Presenter Sherine Ramahi proud of her career

GMT 06:46 2017 Sunday ,19 November

Presenter Sherine Ramahi proud of her career
Arab Today, arab today
Arab Today, arab today
Arab Today, arab today Australian academic's book pulled

GMT 15:20 2017 Monday ,13 November

Australian academic's book pulled
Arab Today, arab today May under Brexit pressure at EU reform summit

GMT 02:14 2017 Saturday ,18 November

May under Brexit pressure at EU reform summit
Arab Today, arab today Delhi half-marathon to go ahead

GMT 03:51 2017 Saturday ,18 November

Delhi half-marathon to go ahead
Arab Today, arab today The history of solar eclipses

GMT 05:16 2017 Sunday ,20 August

The history of solar eclipses
Arab Today, arab today Tesla unveils its all-electric semi truck

GMT 02:59 2017 Saturday ,18 November

Tesla unveils its all-electric semi truck
Arab Today, arab today Baidu speeds up AI progress

GMT 11:46 2017 Friday ,17 November

Baidu speeds up AI progress
Arab Today, arab today Hanan Metawe denies apology for “Major Treason”

GMT 12:22 2017 Thursday ,16 November

Hanan Metawe denies apology for “Major Treason”
Arab Today, arab today paObama climate envoy slams Trump's rejection

GMT 16:04 2017 Friday ,17 November

paObama climate envoy slams Trump's rejection

GMT 08:06 2017 Wednesday ,15 November

Ayten Amer happy for “The Flood” success

GMT 11:15 2017 Thursday ,16 November

Angola oil boss sacked by father's protege

GMT 18:41 2017 Friday ,20 October

Designer Aql Faqih aspires to innovation

GMT 11:38 2017 Wednesday ,15 November

Unloved vultures fight for their survival

GMT 11:49 2017 Thursday ,17 August

Egyptian artist presents new collection of designs

GMT 06:13 2017 Friday ,17 November

Pope denounces healthcare inequality

GMT 05:18 2017 Thursday ,16 November

Boeing announces $27bn from flydubai

GMT 17:12 2017 Monday ,07 August

Al-Shawaifi reveals secrets of total solar eclipse

GMT 16:53 2017 Tuesday ,05 September

Youssra depended on colored foam
Arab Today, arab today
Arab Today, arab today
 
 Arab Today Facebook,arab today facebook  Arab Today Twitter,arab today twitter Arab Today Rss,arab today rss  Arab Today Youtube,arab today youtube  Arab Today Youtube,arab today youtube
arabstoday arabstoday arabstoday arabstoday
arabstoday arabstoday arabstoday
arabstoday
بناية النخيل - رأس النبع _ خلف السفارة الفرنسية _بيروت - لبنان
arabstoday, Arabstoday, Arabstoday