Saudi Arabia’s stock market recovered from early losses and jumped 2.5% yesterday as Deputy Crown Prince Mohammed bin Salman announced an economic overhaul for the oil-dependent kingdom.
He outlined a restructuring of the government’s Public Investment Fund to make it an international investment power, a planned sale of a stake of less than 5% in national oil giant Saudi Aramco, a restructuring of the housing ministry to increase supply of affordable housing, and a “green card” system to give expatriates long-term residence.
There were few details, and many analysts said execution of some of the reforms would be difficult. But the stock market was lifted by a sense that the government was acting energetically to address the economy’s problems.
“The main theme of Vision 2030 is to diversify, liberalise and reform the Saudi economy, and the reliance on oil income will gradually fall,” said Shakeel Sarwar, head of asset management at Bahrain’s Securities and Investment Co. Trading volume climbed to its highest level since August 2015.
“I believe this vision has a lot to offer and am optimistic, but the biggest challenge will be the execution,” said Mohammad al Shammasi, head of asset management at Riyadh-based Derayah Financial.
He said the jump in the stock market might not continue, but noted that other factors had been supporting the bourse’s performance in the last few weeks, including firmer oil prices and generally solid quarterly earnings.
Banking stocks led the market up as the reform plan was announced, since investors think privatisation exercises will benefit institutions with large investment banking operations.
Samba Financial Group, lead underwriter of the recent initial public offer of Middle East Healthcare, rocketed 9.3% and National Commercial Bank added 8.2%.
Elsewhere in the Gulf, Dubai’s third-biggest lender by assets, Mashreq, posted an 18.3% fall in first-quarter net profit as it failed to recoup as many bad debts as it did in the corresponding period last year. Shares in the bank, usually thinly traded, were down 1.1%.
The Dubai index shed 0.7%. Builders Arabtec and Drake & Scull, which have not yet reported quarterly earnings, fell 1.7 and 2.1% respectively.
Egypt’s market was closed for a public holiday.
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