Saudi Arabia's stock market surged on Monday as cement firms climbed before the release of the government's 2018 budget, which is expected to include an increase in infrastructure spending. The Saudi stock index surged 1.4 percent in active trade. Five of the 10 most heavily traded shares and six of the 10 top gainers were cement firms, with Najran Cement jumping 6.0 percent after a 4.5 percent gain on Sunday.
Analysts generally expect a moderate increase in spending in the 2018 budget and for deficit-cutting to slow considerably as the government focuses more on supporting growth; infrastructure spending may rise after two years of austerity.
This looks unlikely to produce a strong economic recovery next year, given the introduction of 5 percent value-added tax at the start of next month and the government's plan to announce fuel price hikes in the first quarter of 2018. Although King Salman last week approved 72 billion riyals ($19.2 billion) worth of measures to stimulate growth in the private sector, only 24 billion riyals of that is to be spent in 2018, a Saudi official said.
Much of the money will be in the form of soft loans extended by state funds; this strategy has had limited success in Saudi Arabia in the past, as many private companies have remained reluctant to borrow the money or commit to projects. Nevertheless, the construction industry could start to recover; accelerating housing construction is one of the government's priorities. Shaker, which as an air conditioner and appliance distributor could benefit from faster home building, rose 1.4 percent on Monday.
In Dubai, the index was flat in very quiet trade. Abu Dhabi climbed 1.1 percent as ADNOC Distribution, which listed last week after an initial public offer of shares at 2.50 dirhams, was the most heavily traded stock and climbed 2.6 percent to 2.74 dirhams. Egypt's blue-chip index was almost flat. Alexandria Mineral Oils climbed 5.5 percent after saying its profit for the latest quarter jumped more than fourfold from a year earlier.
Egypt Gas Co, which handles natural gas engineering and maintenance work, soared 10 percent, rising sharply for a third straight day. It is expected to benefit from work related to Egypt's giant Zohr gas field, where pilot production of gas started this month, and at the end of last week the company forecast it would swing into the black in 2018 as revenues more than doubled. Markets in Qatar and Bahrain were closed for public holidays.
HIGHLIGHTS
SAUDI ARABIA
-- The index surged 1.4 percent to 7,192 points.
DUBAI
-- The index rose 0.2 percent to 3,372 points.
ABU DHABI
-- The index climbed 1.1 percent to 4,397 points.
EGYPT
-- The index edged up 0.03 percent to 14,721 points.
KUWAIT
-- The index rose 0.2 percent to 6,370 points.
OMAN
-- The index gained 0.2 percent to 5,088 points.
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