Real economic growth in Saudi Arabia is forecast to grow by 3.8 percent in 2010, as opposed to 0.15 percent in 2009, according to Riyadh-based Jadwa Investment. The merchant bank also stated that it expects the Saudi stock market index (TASI) to grow by ten percent from its current level during the course of the year, to 7,400 points, with earnings per share to rise 8.2 percent. However, Saudi investors will remain cautious about the stock market, and the TASI is still 70 percent below its peak. “We think the market is likely to record steady gains over the year, rather than the spectacular leaps seen over the period from 2003 to early 2006 when many investors first entered the market,” the institution's March research note indicated. Tadawul All Share Stock Index index closed lower on Monday for the first session in five as banking and petrochemical stocks retreat following a drop in oil prices and on global concerns. The index closed 0.44 percent lower at 6,692.61 points. Market heavyweight Saudi Basic Industries lost 1 percent, its biggest percentage drop in six weeks. Saudi Arabia Fertilizers dropped 0.7 percent. Banking stocks also dropped. Samba Financial Group ended almost 2 percent lower, while SABB Bank declined 1 percent. “The Tadawul (market) edged lower in a knee-jerk reaction, factoring in weakness in most of Asian markets due to renewed concerns over Greece's debt problems ahead of a euro zone summit and on news of an India interest rate hike,” said Mohammed Ishaq Ali, a fund manager at Al Rajhi Capital. “The weakness in oil prices and worries over debt restructuring plan of Dubai World also pushed investors into cautious mode prompting them to book some profit, it's more of a technical correction.” Breaking down its predictions further by sector, Jadwa said that projected earnings per share growth would be highest in the multi-investment and petrochemicals segments. But the bank also reminded its clients that high earnings per share growth wasn't necessarily a strong reason for investment. “One of the sectors we find most attractive for investors - telecoms - is expected to record negative earnings per share growth in 2010,” the statement said. “We favor telecoms because it looks appealing on a valuation basis even if lower earnings are factored in.” Jadwa also earmarked banks and real estate amongst its favored sectors, arguing that market concerns about both these segments' future performance were “overdone”. It pointed out that most banks have the bulk of their provisioning behind them, and that real estate firms were attractively valued even assuming a fall in land prices. Separately, Saudi Arabia's banking sector is forecast to grow at an annual rate of about 18 percent over the next four years, research house RNCOS said. The sector was “highly capitalized, well regulated and more profitable” despite the slowdown in the Kingdom's economy in 2009. “The banking assets are forecasted to grow at CAGR of around 18 percent during 2010
