Saudi Arabia's bourse, encouraged by the prospect of opening up to direct foreign investment, resumed its uptrend on Tuesday on the back of banks and petrochemicals, while most markets in the region also rose modestly. The main Saudi index climbed 0.9 percent to a fresh six-year closing high of 10,940 points. Alinma Bank and Samba Financial Group were the main supports, jumping 4.5 and 3.3 percent respectively.
Saudi banks have been the leaders of a wider upswing triggered by regulators' announcement on July 22 that the kingdom will open its stock market to direct foreign investment in the first half of next year. "The Saudi banking sector has done very well in the last two months, but we have to remember that between 2009 and 2011 it was a huge laggard," said Shakeel Sarwar, head of asset management at Securities & Investment Co (SICO) in Bahrain.
Banks lagged both the wider Saudi market in its recovery from the 2008-2009 stock price crash, and their regional peers in metrics such as price to book value, which is often applied to lenders. "I think that convergence is happening now," Sarwar said. According to Thomson Reuters data, Alinma Bank and Samba Financial Group, whose shares have gained more than 30 percent each since July 21, trade at 1.8 and 1.4 times book value, based on estimates for the next 12 months.
In comparison, National Bank of Abu Dhabi trades at 1.9 book, Qatar National Bank at 2.2 and National Bank of Kuwait at 1.8. Saudi petrochemicals were also strong on Tuesday even as the price of Brent crude oil appeared set for a second straight monthly decline in August. Shares in Saudi International Petrochemical Co (Sipchem) rose 6.1 percent and Saudi Basic Industries added 0.7 percent.
The oil price "is not a major variable right now and that's why the market is ignoring it," Sarwar said. Markets in the United Arab Emirates also edged up, but trading volumes remained low and declined from the last session. Dubai added 0.1 percent, largely thanks to developer Emaar Properties which was up 0.5 percent. Abu Dhabi's bourse gained 0.7 percent on the back of lenders such as National Bank of Abu Dhabi and Abu Dhabi Islamic Bank, which added 1.8 and 5.1 percent respectively.
Shares in Islamic insurer National Takaful Co (Watania) surged 9.3 percent to 1.18 dirhams after the UAE stock market regulator approved the take-over of Watania by MB UAE Investments and its affiliate Al Madina Insurance Co. Al Madina Insurance indicated in a separate statement to Oman's bourse that it would buy 14.3 million Watania shares for 17.88 million dirhams ($4.87 million), implying it would pay 1.25 dirhams per share. Shares in Al Madina added 2.5 percent while Oman's index slipped 0.3 percent.
Egypt's main index fell 0.5 percent as investors continued to sell stocks that had recently posted strong gains, such as developer Talaat Moustafa, which slid 2.3 percent after rising 26 percent in the last two months. Kuwait's benchmark added 0.3 percent and closed above 7,400 points for the first time since May after the cabinet appointed former finance minister Nayef al-Hajraf as chairman of the Capital Markets Authority, which regulates the stock market. Hajraf replaces Saleh al-Falah, who had held the post since the CMA began operating in early 2011. KUNA did not specify why Falah was leaving, beyond saying that his appointment had ended, but he has drawn criticism from some investors for his efforts to crack down on illicit speculation and enforce corporate governance rules.