GCC buoys MENA capital market in Q1

An international buyout of a homegrown brand and an acquisition of a major Saudi firm by another Saudi behemoth kept the market buoyant during the quarter.

Waleed AlBawardi (R), Executive Director of Cash markets at Saudi Stock Exchange (Tadawul), and Mohammed Al Shroogi, Chairman of the Board of Directors at the L'azurde Company for Jewellery, attend a ceremony for the listing of L'azurde at Tadawul, in Riyadh, Saudi Arabia June 29, 2016.

Waleed AlBawardi (R), Executive Director of Cash markets at Saudi Stock Exchange (Tadawul), and Mohammed Al Shroogi, Chairman of the Board of Directors at the L'azurde Company for Jewellery, attend a ceremony for the listing of L'azurde at Tadawul, in Riyadh, Saudi Arabia June 29, 2016.

REUTERS/Faisal Al Nasser

MENA’s blue-chip corporates were very active in March with mergers, acquisitions and sale of assets keeping investors engaged in the markets. Even though three regional markets were flat, the S&P GCC Index was up 4.1% during the month, taking its quarterly gains to 10%.

Crude oil prices, which were up another 1.9% in March, have now risen just under 24.5% during the first quarter, further fuelling economic activity.

Two major corporate news, both coming out of Saudi Arabia, kept the markets going.

In late March, state-owned oil giant Saudi Aramco said it will acquire a 70% stake in Saudi Arabian Basic Industries (SABIC), the region’s largest listed company. The purchase price for the shares is SAR 123.40 per share, totalling SAR 259.125 billion, or USD 69.1 billion.

The remaining 30% publicly traded shares in SABIC are not part of the transaction, and Saudi Aramco has advised that it has no plans to acquire these remaining shares. The transaction is subject to certain closing conditions, including regulatory approvals.


Three Saudi corporates are also expecting a windfall after selling their stake in ride-sharing company Careem to global operator Uber Inc. for USD 3.1 billion.

Al Tayyar Travel Group, along with Saudi Telecom Ventures, invested USD 10 million in Careem in 2014., with Kingdom Holding acquiring a 7.11% stake in the company from Abraaj Group for USD 62 million in June 2017.

Al Tayyar said it expects to record SAR 1.78 billion, or USD 475 million, in gross profit. Saudi Telecom, which owns a direct stake of around 8.8% in Careem, expects to net nearly SAR 1.03 billion, partly in cash and partly in Uber’s convertible notes.

Kingdom Holding also sold its stake for SAR 1.25 billion, of which SAR 565 million are in cash and the remaining in convertible bonds.

The Saudi market rose 3.8% during the month, taking its year-to-date gains to 12.7%.

The market was also buoyed by the first tranche of FTSE’s five-phase process to include Saudi Arabia in its emerging markets index.

Analysts believe qualified foreign investors (QFIs) have been very active in the market.

“If we assume traded value during the auction period (SAR 1.4 billion) on 14 March, the inclusion day, to be primarily driven by QFI/Swaps, then… foreigners have purchased SAR 2.66 billion in Saudi stocks, which is above market expectations,” according to Al Rajhi Bank research.


Kuwait was the best-performing market in the GCC region, with the all-share index rising 7.4% in March, to take its quarterly gains for the year to 10.6%. The market was boosted by bank earnings and dividends, with the banking index rising 10.6% during the month.

The value of shares traded also jumped 86.3%, as investors made a strong comeback.

The UAE markets lost some momentum in March, with Dubai virtually flat, and Abu Dhabi losing ground to fall 1.2%. Still, DFM General Index remains up 4.2% for the year, while ADX General Index is 3.2% higher during the same period.

The Abu Dhabi market suffered due to the end of the dividend season, which encouraged investors to rotate to other markets – the market has been coming off a strong 11.7% gain last year. The value of trades rose for a second month in a sign that activity is rising.

Dubai was also subdued for the month, with rise in transportation, telecommunications and financial services indices, offset by declines in real estate and construction, services, and consumer staples.

Aramex PJSC gained the most in more than four years after a unit of Australian Postal Corp. sold its stake in delivery service company, setting the stage for other foreign investors to buy the stock.

Dubai, which plunged 25% last year, is getting attention from institutional investors, with six out of 10 fund managers polled by Reuters saying they would increase their allocations to the UAE.

Four of the 10 managers polled said they would increase their allocation in Saudi Arabia, while 50 of the fund managers said they would increase investments in Egypt. Around 40% of fund managers are expected to decrease their allocation to Qatar, and the same amount expected to increase their allocations to Kuwait.

Egypt fell 0.4% during the month, but is still 13.1% up during the quarter. Qatar, which surged 20.8% last year, was flat in March, and is down 1.9% in the first quarter.

Bahrain was also flat for the month, and is up 5.7% for the first three months of 2019.

Oman, the GCC region’s smallest market, fell steeply by 3.9% to end the quarter down 7.9%. However, the sultanate has implemented new laws, including a commercial companies law and a mining law, which the government hopes will revive economic activity and the market’s flagging fortunes.

© Noor Bank 2019