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Tadawul’s benchmark index TASI shed roughly 4.8% in May, its biggest monthly decline this year, despite trading volumes going up 39.5%, according to our review of official market data. TASI slipped 0.56% at Thursday’s close, logging an 8.7% YTD decline.
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IN CONTEXT- The index was on course to be the worst-performer in May among 92 equity benchmarks tracked by Bloomberg. The drop comes amid slumping oil prices and growing investor jitters over the Kingdom’s fiscal outlook and mega-projects spending.
Only 23 out of the 253 main market-listed companies traded in the green last month, according to Bloomberg data. Index heavyweights Al Rajhi Bank and Acwa Power were among the biggest drags, reflecting broad-based weakness across sectors, the business news service wrote.
Other heavyweights like Aramco and Sabic closed 1Q either in the red or with a drop in net income. Saudi Aramco reported a 4.6% y-o-y drop in net income to SAR 97.54 bn (USD 26 bn) in 1Q, while Saudi Basic Industries (Sabic) moved into the red, reporting a net loss of SAR 1.2 bn.
Some of this can be blamed on falling oil prices, which have spent most of the past two months hovering around USD 65 per barrel, well below what the Kingdom needs to balance its budget. Bloomberg Economics estimates the breakeven oil price for 1Q is USD 96 per barrel, rising to USD 113 mn when accounting for domestic PIF spending. That is its highest level since the launch of Vision 2030 in 2016, Bloomberg said.
How we’re faring against our peers: The bourse’s fourth straight month in the red — its longest losing streak in over a decade — is a sharp contrast to the broader emerging markets index, which notched its best month in May since September, Bloomberg wrote.
Pundits remain bullish on the long-term: “Oil prices are a headwind for [Saudi], and force the country to make capital allocation decisions that they wouldn’t need to if oil prices were higher at around USD 100,” Dominic Bokor-Ingram, a fund manager at Fiera Capital told the business information service. “It’s too much of a risk to ignore the Saudi market for an emerging-market investor,” he added.
Where TASI stands five months in: TASI started the year on a high note, closing up 3.2% inJanuary, before giving up ground every month since, dropping 2.4% in February, 0.7% in March, and 2.9% in April.
