By Khalil Hanware
The Saudi stock market edged higher on Sunday as traders bought back shares ahead of Monday’s 2016 budget announcement.
“The Tadawul is very likely to track oil prices next year, and will therefore stay flat at best,” commented James Reeve, deputy chief economist and assistant general manager at Samba Financial Group.
The Tadawul All-Share Index (TASI) closed 0.1 percent higher on Sunday at 6,946 points, rebounding from a low of 6,874 points because of rises in stocks which investors hope will be largely unaffected by the Saudi budget.
The index, however, is down 16.65 percent so far this year.
“This year’s poor performance was due to low oil prices, which have impacted government spending and thereby corporate profits,” Reeve told Arab News.
“There is not really any other reason, though of course all emerging stock markets have performed poorly given China’s slowdown and the strong dollar,” he added.
According to Reuters, official sources said that senior official of Saudi Aramco and the ministers of Economy and Planning, Finance, and Water and Electricity will appear at a news conference on the budget on Monday. The Budget 2016 is expected to contain major changes in spending and possibly revenue policy and officials may want to explain these to the public, Reuters added.
The price of Brent crude oil recently crashed to an 11-year low of $36 a barrel from above $100, 18 months ago.
Tracking the oil market, the petrochemical Industries index dropped 0.75 percent on Sunday. It has declined 22.11 percent so far this year.
A regional analyst told Arab News: “One of the important things about the budget is that it will provide a sense of direction and clarity on the government’s policy priorities. One reason for the recent volatility is a lack of clarity at a time of significant global challenges.”
He added that the situation next year would depend to a large extent on the direction of oil prices.
“This clearly has been a major factor depressing valuations this year. While we can probably assume that the oil cycle is about to turn, the timing still remains unclear,” he said.
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