TASI holds through regional war, summer lull in 1H

The Saudi market ended the first half up 3% for the year, a result that looks unremarkable until you count what the six months contained. TASI weathered a regional war, a mid-April high it couldn’t hold, and a summer liquidity drought, and still closed 1H 2026 at 10,799.92, a 3% year-to-date increase. Measured against the same point a year earlier, the index is down 3.26%, per Tadawul’s 1H statistical report.

The path there was anything but straight. The index edged up around 8% in January, a rebound from the selling that closed out 2025, Argaam Investments Business Analysis Director Youssef Al Youssef tells EnterpriseAM, before profit-taking and the outbreak of the regional conflict set in. It recovered through March, peaked at 11,589.05 on 15 April, then gave most of the January gain back across a turbulent May and June, whipsawed by alternating talk of negotiations and renewed strikes. It held the 10,800 line into the close, a level Al Youssef says is firm support even after an early-July test of 11,000.

Look past the index, and the tape hides more than it shows. Market cap rose 3.40% y-o-y to SAR 9.44 tn (USD 2.52 tn). The gap is explained by a heavy run of bonus issues and capital increases — Al Rajhi, Riyad Bank and Alinma among them — plus fresh listings. Valuations barely budged — the market’s trailing P/E ended 1H at 16.0x, down from 16.4x in January.

Liquidity was the real casualty: Value traded fell 10.39% y-o-y to SAR 616.57 bn (USD 164.42 bn) and the number of trades dropped 11.79%. That points to cheaper, higher-turnover names carrying the tape. Americana alone accounted for 12.23% of all shares traded, while the value leaderboard stayed concentrated in Al Rajhi (SAR 47.5 bn) and Aramco (SAR 43.6 bn). The primary market cooled to match, with two IPOs in 1H against six in the same period last year. Al Youssef pins the late-June thinning on the summer exodus and the familiar “sell in May and go away” reflex among retail investors.

That the market held up at all, Al Youssef argues, is a point about the economy underneath it. Saudi was among the region’s better performers in the early weeks of the conflict, he says, on the flexibility of an economy able to keep oil moving by routing exports across the East-West pipeline rather than through a contested Gulf.

The resilience showed in the sector split: Ins. ran away with the half (+23.59% year-to-date) and energy held firm (+9.84%), while media and entertainment cratered (-35.90%) and healthcare (-11.89%) and transportation (-11.26%) lagged.

The post-April slide was a correction with clear leadership, Sico Capital Head of Research Chiro Ghosh tells EnterpriseAM. Banking, materials, healthcare, and the defensive capital-goods names drove it down. Banks underperformed as expectations for rate cuts faded, raising the specter of funding costs staying higher for longer. Materials came under pressure from the prospect of fresh supply as regional risk eased. The capital-goods names that had rallied on the conflict as a defensive play began handing gains back as de-escalation looked likelier, though the sector still sits, by his estimate, around 9% above its pre-conflict level. Healthcare was dented by worries over softer hospital visitation and medical inflation tied to possible disruption of regional trade routes, pressures he expects to normalize over the coming quarters.

Why it matters: The half’s flat-looking close sits on top of a structural rewiring. Effective 1 February, the CMA scrapped the Qualified Foreign Investor regime and the swap framework, opening the main market to all categories of foreign investors for direct purchase.

What’s next?

Both are constructive on 2H, by different roads. Ghosh expects rotation, with the leaders of the first half moderating while the laggards he named recover as cyclical and macro headwinds ease. His one hedge is energy, where a durable regional peace could soften oil-price expectations and weigh on the sector that helped hold the market up.

Al Youssef’s case is about flows and earnings. He is watching 2Q results closely, the first full quarter to capture the conflict where 1Q caught only March, and expects the results to drive real positioning. Beyond earnings, he sees a structural catalyst in the mechanism to raise foreign-ownership caps, which the CMA flagged late last year, and details are expected to land this half. That would pull passive, index-tracking money in behind it.