Investor sentiment on the Saudi capital market remained mostly cautious in 2019, with the real estate sector potentially remaining under pressure, a survey by Al Rajhi Capital Research showed on Sunday.

Of those surveyed, 38 percent remained negative while 32 percent were neutral and 30 percent were positive on the Saudi stock market for 2019, the survey showed.

The Saudi stock market has gained 8.62 percent so far in 2018, but a recent drop in oil prices has caused a 2 percent during the fourth quarter. On Sunday, the Tadawul index was trading 0.21 percent lower by 15:10 GST.

Despite the caution from investors, Al Rajhi Capital said that sentiment could change “with expected key drivers such as a) inclusion of Saudi Arabia in the FTSE EM and MSCI EM indices next year (in different phases) b) higher probability of an improvement in oil prices from the current level c) improvement in Govt. (government) spending.”

Index complier MSCI will include Riyadh in its benchmark emerging market index, which is expected to attract billions of dollars from foreign funds to the market - both passive and active funds. In June, MSCI said it would upgrade the kingdom to emerging market status in phases from mid-2019.

Saudi Arabia’s stock market will also join FTSE Russell’s emerging market index starting in March next year.

Oil prices have dropped more than 7 percent in 2018. Prices were boosted at the end of last week after The Organization of the Petroleum Exporting Countries (OPEC) agreed to cut production by a 1.2 million barrels per day starting in 2019.

The producer group agreed to curb output by 800,000 barrel per day from January while non-OPEC allies will contribute an additional 400,000 barrel per day of cuts.

The survey found that nearly 68 percent of respondents were already invested in the stock market with most people preferring to invest on their own and only a few participants investing via mutual funds.

“The primary objective for the investment in the stock market remains long term gains (nearly 59% of investor responses), while around one quarter of investors are active in trading in order to earn speculative gains,” the survey added.

The survey also showed that 72 percent of participants have either maintained or increased their trading activity post government reforms (Read more here), “reflecting investor confidence in the initiatives undertaken by the Government.”

On the real estate sector for 2019, 27 percent of respondents were very negative, 30 percent were negative, 26 percent had a moderate opinion, while 10 percent were positive and 7 percent were very positive.

Elsewhere in the region, Dubai’s index ended the day 1.15 percent lower, Abu Dhabi’s index closed 0.82 percent lower, Qatar’s index closed the day mostly flat (0.06 percent higher), Kuwait’s premier index was up 0.12 percent, Bahrain’s index edged 0.2 percent lower and Oman’s index closed mainly flat (0.02 percent lower).

By 15:10 GST, Egypt’s blue-chip index EGX30 was trading 2.5 percent lower.

(Reporting by Gerard Aoun; Editing by Michael Fahy)

(Gerard.aoun@refinitiv.com)

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