Saudi Stocks Slump as Valuation Concerns Mount: Inside EM

Middle Eastern stock markets were mixed as investors reconciled concerns of high valuations with more positive economic indicators.

Saudi Arabia’s Tadawul All Share Index led losses in the Gulf, dropping as much as 0.8% on Sunday. The kingdom’s equities have climbed for six straight weeks, their longest winning streak since September, with the key gauge hovering near its highest in almost seven years amid optimism on oil prices.

The lofty valuations are reason for caution, according to Tarek Fadlallah, the chief executive officer of Nomura Asset Management’s Middle East unit.

“The macro story in Saudi Arabia is much more interesting than the micro story,” he said on Bloomberg TV. There is “a lot going on to be optimistic about if you are looking from a 30,000-foot view. However, if you look at the company level, there’s been very little restructuring. There’s been very little advancement in terms of the profitability of individual companies.”

Meantime, stock exchanges from Dubai to Oman, Egypt and Israel tracked global indexes, which declined Friday as the Federal Reserve’s surprise hawkish tone upended the reflation trade that’s gained favor this year. Shares in Kuwait, Qatar and Bahrain rose, while Abu Dhabi’s were little changed.

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  • “Flourishing activity and higher oil prices are boosting Saudi and UAE banks’ valuations to pre-virus levels,” Bloomberg Intelligence analysts Edmond Christou and Philip Richards wrote in a note, adding that Kuwaiti lenders’ earnings are slowly recovering

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