Tadawul posts losses but Saudi markets remain fundamentally strong
'A bit of a correction' sheds some prior gains on the Saudi stock index, but professionals see reasons to keep investing in the kingdom.
Earlier in August, Saudi Arabia's Tadawul All Share Index posted nine straight days of declines and shed over 5% of its value in the worst streak of losses in over six years. During the week ending Aug. 3, outflows reached 6.5 billion Saudi riyals ($1.7 billion) as foreign investors sold off Saudi stocks. After an optimistic end to 2022 and a 12% rise between January and July, what has happened?
Akber Khan, acting chief executive officer at Al Rayan Investment in Doha, told Al-Monitor that many of the larger Saudi listed companies have struggled since the start of the year. However, very strong performances from a handful of firms pushed up the Tadawul Index and therefore skewed the overall picture.
“Sectors representing 70% of the index — banking, energy, and materials — have actually performed very poorly this year,” Khan said. Stocks outside those three sectors boosted the index, "and now we’re seeing a bit of a correction.”
Several companies have indeed had a strong year on the Tadawul. The telecoms firm Zain has seen gains of over 25% since January. Elm Co., which offers digital services and products in Saudi Arabia, is up more than 110%, and agricultural firm Nadec had strengthened by over 135%. However, it is a very different story for the banking and materials companies which dominate the index. Riyad Bank is down 5%, as is Bank Albilad. Saudi Kayan Petrochemical has shed about 10% of its value.
