Saudi Arabia's stock market extended on the previous session's rally on Thursday as investors focused on shares likely to benefit from economic reforms and from MSCI's decision while Qatar rebounded as foreign funds were net buyers. The Riyadh index added 1.2 percent to a 20-month high of 7,426 points in heavy trade. It is now up 6.8 percent in reaction to the appointment of the architect of the economic reform and privatisation plans, Prince Mohammed bin Salman, to crown prince. Previously the 31-year old was deputy crown prince.
Some shares which were top gainers on the previous day continued to rally with the only listed miner, Saudi Arabian Mining, surging 9.4 percent. The now crown prince had previously stressed the importance of expanding the mining sector as part of plans to diversify the economy from oil. Banks were also strong with government-majority owned National Commercial Bank gaining 4.6 percent, extending on its 10 percent surge on Wednesday.
Analysts at Dubai-based Exotix said in a note the Saudi banking stocks "screen particularly well" compared to other sectors, because they are trading at a relatively attractive valuation. News of the retroactive reinstatement of civil servants' allowances was supportive for the retail sector on the expectation that shoppers will be spending more money in the Eid al-Fitr break, which will start either Sunday or Monday. Apparel retailer and mall operator Fawaz Alhokair climbed 4.7 percent.
The austerity reversal will bring in between 5 and 6 billion riyals ($1.3 billion to $1.6 billion) according to the finance minister. Public sector workers were also given an extra week off for Eid, which marks the end of the holy month of Ramadan. Also, investors were happy that index compiler MSCI placed Riyadh on the watch list for an emerging market upgrade. Analysts predict the market may gain 20-30 percent through to the decision date in June 2018. Meanwhile, Brent crude futures staying near overnight 10-month lows weighed on some large cap petrochemical stocks; Saudi Basic Industries lost 2.5 percent.
QATAR, UAE Qatar's stock index rebounded 2.9 percent, snapping four sessions of declines as 39 shares rose and only two declined. Foreign funds, which have been net sellers of Qatari shares since June 5 when Saudi Arabia and three other Arab states cut diplomatic and trade links with Doha, were net buyers on Thursday, suggesting they have regained some confidence in the market.
Shares of Vodafone Qatar, a constituent of the MSCI emerging market benchmark, jumped 5.2 percent and was the most traded stock on Thursday. Elsewhere, Abu Dhabi's index fell 0.6 percent as Eshraq Properties, the most traded stock, lost 8.7 percent. On Thursday the company said it will meet on July 5 to ratify the sale of its shares in real-estate investment fund Ward Holding.
Dubai's index fell 0.5 percent as shares of the most traded stock GFH Financial Group slumped 8.9 percent. On Wednesday the company said that Integrated Capital (IC), owned by Abu Dhabi Financial Group (ADFG) transferred its 21 million shares in GFH to Ajman Bank. IC will remain to be "beneficial owner" with a 13.38 percent stake. "This announcement clearly prompted retail investors to cash out, it was negative on sentiment," said a Dubai-based broker.