RIYADH —Saudi Arabia's stock market, which on Monday opened up to foreigners, closed 0.86% lower at 9,561.7 points as local investors were sellers after some sharp early-year gains, while international institutions largely stayed away on valuation concerns. Stocks on the Saudi market—one of the few major global bourses to have restricted foreign access—have rallied this year as local investors cheered the government's plans to allow direct foreign investments in its listed companies, starting Monday (June 15). But valuations looked expensive, holding back several foreign investors. Until the Saudi bourse becomes part of a global benchmark, like the MSCI, most inflows are likely to come from actively managed funds who will assess valuations before committing any serious amount of money, said Sachin Mohindra, a portfolio manager at Invest AD. After opening in positive territory, the benchmark Saudi stocks index closed 0.9% lower at 9561.70. Petrochemical and bank stocks, among the heavyweights in the local bourse, led the decline on Monday. The market is still up about 15% to date. The Saudi market is trading at 15.5x 12-month forward earnings, which is close to 5-year highs, Credit Suisse said. The broader Gulf markets are at 14.2x and global emerging markets at 11.9x, it added. The Saudi market is the region's top performer so far this year. The market's opening will allow Saudi Arabia potentially to attract tens of billions of dollars in fresh investment, helping to ease the pressure on the government to support the private sector amid a weak outlook for oil prices, the country's key export. Foreign investors, meanwhile, can invest in some of the region's fastest-growing companies in sectors including financials, industrials, telecommunications, food and retail, gaining exposure to the Gulf region's most populous nation. The kingdom posted solid economic growth in the past decade funded mostly by hundreds of billions of dollars in oil-sales income. But a sharp drop in crude-oil prices since the middle of last year made it dipped into its foreign reserves this year. “From an economic perspective, the move is timely, as foreign portfolio inflows would help to offset an expected deterioration in the current account surplus this year,” said Khatija Haque, the head of MENA research at Emirates NBD. — SG/Agencies
