|08 January, 2019

Shares in Saudi Arabia's Al Rajhi surged since the start of the week, analyst sees the bank as "a safe play"

Al Rajhi's shares rose more than 7 percent so far this week, after the bank announced a plan to increase its capital

Shares in Saudi Arabia's Al Rajhi surged since the start of the week, analyst sees the bank as "a safe play"

Shares in Saudi Arabia’s Al Rajhi Banking and Investment Corporation have risen by 7.2 percent since the start of the week, despite a 0.21 percent retreat on Tuesday as traders took profits on the gains made in previous sessions.

The bank announced on Sunday that it has recommended to its Extraordinary General Assembly an increase of capital by 53.8 percent through bonus shares, from 1.625 billion shares to 2.5 billion shares.

The statement said that the issue of bonus shares is being recommended to support the bank's resources, which would contribute to growth ratios in future years.

“We see Rajhi as a safe play in Saudi Arabia,” Shabbir Malik, banking analyst at EFG Hermes, told Zawya by email.

“It has superior funding profile, its credit quality metrics are very strong, its loan book is concentrated in retail, which we see as a low-risk segment in Saudi, and it is well-capitalised,” Malik said.

The bank announced on Monday that its board of directors recommended the distribution of a 2.25 Saudi riyal dividend per share for 1.625 billion eligible shares, meaning a total cash dividend of 3.656 billion Saudi riyals would be paid, if approved.

According to data from Eikon, two analysts have a 'strong buy' rating on the stock, six analysts have a 'buy' rating and four analysts have a ‘hold’ rating.

The Saudi index has added 2.97 percent since the start of the year, as the market tracked a jump in oil prices and global markets so far in 2019. The Tadawul index closed 0.12 percent higher on Tuesday.

Brent oil prices have gained 7.14 percent since the start of the year, while MSCI’s world equity index, which tracks shares in 47 countries, has increased by 1.93 percent in 2019, data from Eikon showed at 13:15 GST on Tuesday.

The awaited inclusion of the Saudi market in the MSCI and FTSE Russell emerging market indices later this year, which is expected to attract billions of dollars of passive fund flows into the market, has also pushed Tadawul higher.

A monthly Reuters poll of 13 leading fund managers in the region, conducted at the end of December 2018, showed that participants favour Saudi Arabia’s stock market among its peers in the region, as they expect a major inflow of funds due to the FTSE Russell and MSCI emerging market indices inclusions.

Fifty-four percent of participating managers expect to raise their Saudi equity allocations over the next three months and none expect to reduce them, the poll showed.

Elsewhere in the region, Dubai’s index dropped 0.24 percent on Tuesday, Abu Dhabi’s index edged 0.15 percent lower, Qatar’s index dropped 0.34 percent, Kuwait’s premier market index closed mainly flat, while Bahrain’s index edged 0.11 percent higher and Oman’s index was mainly flat.

By 14:58 GST, Egypt’s blue-chip index EGX30 was trading 0.51 percent higher, the market was closed on Monday for a public holiday.

(Reporting by Gerard Aoun; Editing by Michael Fahy)


Our Standards: The Thomson Reuters Trust Principles

Disclaimer: This article is provided for informational purposes only. The content does not provide tax, legal or investment advice or opinion regarding the suitability, value or profitability of any particular security, portfolio or investment strategy. Read our full disclaimer policy here.

© ZAWYA 2019

More From Equities