May 08 2012 |
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Deal with MSCI to spur capital flow to Saudi
Kingdom's monetary indicators slow as investors prefer stocks
National Commercial Bank ( NCB ) said Tadawul had already been stimulated by an upsurge in the domestic economy and preference of equity by local investors at the expense of bank deposits.
In its weekly bulletin, it said this had led to a slowdown in deposits and other monetary indicators in the world's oil powerhouse and largest Arab economy.
"We suspect capital gains in domestic equities were favoured as oppose to increasing idle funds," it said, adding that trading volumes during the first three months of 2012 averaged at SR10.5 bn in comparison to SR4.1 bn during the same period last year.
According to NCB , excess liquidity in the Saudi market raises fear of escalating consumer prices and officials have been in a wait-and-see mode of late. But it added that the Saudi private sector seems to have rather eased some of the steam as liquidity sought risky assets in the local equity market.
It showed that the latest official monetary announcement reveals that the base (M0) recorded the slowest annual growth over the last four months and well below 2011's average at only 5.3 per cent.
It attributed the slowdown to the third consecutive monthly contraction in bank deposits with the Saudi Arabian Monetary Agency.
Consequently, Saudi's money supply (M3) grew at a relatively moderate pace, 10.5 per cent Y/Y which is the slowest since March 2011, it added.
© Emirates 24|7 2012
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