Saudi Stocks Extend Slide On Reflation Trade Slowdown: Inside EM

Saudi Arabian stocks dropped for a fifth day, their longest losing streak in more than a year, triggered by a pullback in the reflation trade globally.

The benchmark Tadawul All Share Index fell as much as 1.5% on Sunday, the most since December, leading losses in the Middle East. Stocks also dropped in Dubai.

“The decline is linked to a partial unwind in the global reflation trade,” said Divye Arora, a portfolio manager at Daman Investments in Dubai. “However, in the current backdrop of strong oil prices and an expected increase in public and private capital spending, we continue to see attractive themes to play in the GCC.”

The Tadawul fell for a fifth day in the longest losing streak since January 2020, weighed down mostly by banks and food-linked stocks. The index had been strengthening for weeks before the drop, reaching a key level it hasn’t been able to surpass for about two decades.

Other than profit-booking, the decline in Saudi stocks “is mainly due to geopolitical issues” linked to the OPEC+ crisis, said Junaid Ansari, senior vice president of investment strategy and research at Kamco Investment Co. “That said, we don’t expect a correction in the market as these factors are temporary and unless there is an adverse outcome” within OPEC+.

MIDDLE EASTERN MARKETS:

  • Saudi-based Almarai shares dropped most since October after reporting earnings on Sunday
    • “While the growth outlook is primarily driven by poultry expansion and strategic M&A, we believe all the positives are already priced in,” NCB Capital analyst Nauman Khan wrote in a note on June 30
    • Saudi Research and Media gained most on the benchmark by points after announcing plans to expand portfolio, digital offerings
  • Dubai shares fall for sixth day in the longest losing streak since July 2020
    • Emirates NBD -2.2%; Emaar Properties -0.7%; Aramex -1.3%
    • Second-quarter earnings “should provide some relief to the overall market as it is expected to be better than 2Q-2020,” Kamco’s Ansari said
    • NOTE: Lira’s Near-15% Plunge to Exacerbate Gulf Banks’ Forex Losses
  • Abu Dhabi-listed shares rise the most in the Gulf
  • Israeli stocks gained as much as 1.5%, recovering from a 2% drop on Thursday
  • The MSCI Emerging Markets index dropped 2.7% last week, down for a second week for the first time since March

Markets snapshot as of 4:40 p.m. in Dubai:

  • Tadawul All Share Index -1.3% at close
  • Dubai Financial Market General Index -0.7% at close
  • ADX General Index +0.4% at close
  • Kuwait Premier Market +0.1% at close
  • QE Index -0.5% at close
  • MSM 30 Index +0.3% at close
  • EGX 30 Index -0.3% at close
  • TA-35 Index +1.4%

Key News:

  • Dubai-based Shuaa Capital surged as much as 15% on Sunday after announcing early talks with investment banks to set up three SPACs
  • Sharjah developer Arada will use a facility from Dubai Islamic Bank of AED250 million to fund its Aljada project in Sharjah
  • Dubai’s Foundation Holdings Co. bought a 51%-stake in Saudi Arabia-based Shifa Al Munthaza Polyclinic, marking its second investment in the kingdom’s fast-growing market for medical care, and said it plans to list the firm in the next two years

©2021 Bloomberg L.P.

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