Tadawul’s benchmark index TASI bucked the regional trend last month, falling 2.2% to close just below the 11k mark, according to Kamco Invest’s GCC markets July report (pdf). The Kingdom was the only market in the GCC to post a monthly loss, weighed down by broad-based declines across sectors and investor caution around project momentum as oil prices hovered near USD 70/bbl.

Sector performance was largely in the red. Utilities led the drop with a 10.7% fall, dragged by heavy losses in Acwa Power, while ins. followed with a decline of 9.1% and software and services with a drop of 8.6%. The telecom sector was the only segment to edge higher during the month.

Earnings season offers some relief: By the end of July, some 80 companies had reported 2Q results, with aggregate income rising 13.5% y-o-y to SAR 34.4 bn. Banks drove the bulk of the increase, posting a 17.7% jump to nearly SAR 23 bn, supported by strong net interest and non-interest income despite slightly higher impairments. Telecom operators also delivered, with bottom lines up 17.4% y-o-y last quarter.

Trading activity picked up. Volumes nearly doubled m-o-m to 8.6 bn shares, while traded value rose to SAR 107.5 bn, though daily turnover remained below 2024 averages. Foreign and retail investors were net buyers for the month, while local institutions continued to pare holdings for the 15th week in a row.

What’s pushing the index down? Tadawul’s slump this year reflects a mix of weaker oil prices, surging sovereign debt issuance, and a string of underwhelming IPOs that have sapped investor sentiment. Tight domestic liquidity has left banks more exposed to government borrowing, fueling concerns that Riyadh could dial back diversification spending if crude stays subdued. Meanwhile, project awards have slowed, foreign investors remain cautious about the market’s heavy reliance on oil, banks, and petrochemicals, and new listings have failed to match the blockbuster debuts of 2023 and 2024.

IN CONTEXT- Gulf markets mostly extended their summer rally in July, buoyed by 2Q earnings optimism and a risk-on tone across global equities. The MSCI GCC Index gained 2.2% during the month, marking a second consecutive month of gains, with six of the seven GCC bourses closing in the green. The GCC index was up by 3.7% YTD.

Also from the region: The DFM recorded the strongest monthly performance in the region, closing up 7.9% in July with a 19.4% gain YTD. The FTSE ADX General Index rose 4.1% m-o-m, its fourth straight monthly gain, bringing its YTD gain to 10.1%. Boursa Kuwait extended its rally to a third month, though July’s gains were driven primarily by mid- and small-cap names. Qatar’s QE 20 Index gained 4.8% in July, with banks and consumer stocks in the driver’s seat. Meanwhile, Egypt’s EGX gained 4.1% last month, with non-bank financial services shares being the most-traded equities by value in July (excluding block trades).

Looking ahead: While July’s rally reflects optimism around corporate earnings, the divergence between diversified economies like the UAE and Qatar and oil-exporting heavyweights like Saudi Arabia could continue to shape market sentiment in the near term. Investors will also be watching oil price movements, project execution momentum, and the trajectory of US interest rates.

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