Tags: Gulf | Markets | Rally | saudi | Economic | Incentives

Gulf Markets Rally on Saudi Economic Incentives

Sunday, 20 Mar 2011 02:15 PM

Major Gulf Arab stock markets rallied on Sunday, led by Saudi Arabia's exchange after that nation's king pledged roughly $93 billion in financial support measures in a move aimed at quieting discontent in the Arab world's biggest economy.

Saudi Arabia's Tadawul All Shares Index closed up 4.5 percent, at 6,343 points, while the Dubai Financial Market closed 2.6 percent higher at 1,509 points. Analysts said the gains reflected new confidence in the oil-rich region after massive protests in Bahrain had regional markets vacillating sharply over the past couple of weeks.

"It's a confidence booster for the market, and the economy, because the (Saudi) government has the capacity and willingness to do what is needed," said John Sfakianakis, chief economist at Riyadh, Saudi Arabia-based Banque Saudi Fransi, referring to the new measures announced by the Saudi monarch.

King Abdullah unveiled the massive financial package on Friday, in a second bid in under a month to allay rumblings of unrest in the oil-rich nation by pledging additional services, bonuses, housing and aid to his people.

The measures, which will cost the Saudi government about 350 billion Saudi riyals ($93 billion) are by far the most expensive and far reaching attempts by an Arab government to tackle some of the core economic and financial issues that have served as a catalyst for the protests, which have led to the ouster of Tunisia's and Egypt's presidents.

The Saudi stock market, which was closed on Saturday because of an official holiday, welcomed the new measures, which analysts say are equal to about 21 percent of the OPEC kingpin's gross domestic product.

Shares of 145 companies climbed, representing all sectors of the Saudi economy, according to the Tadawaul's website, and the latest rally narrowed the index's year-to-date losses to just 4.8 percent. About two weeks ago, the TASI's year-to-date losses were well over 15 percent.

The gains, which were also reflected on the Qatari, Omani and Abu Dhabi stock exchanges to lesser degrees, demonstrated how the Gulf region's main focus, at least for now, was on the developments closer to home. The imposition of a no-fly zone over Libya and the accompanying coalition assault on that North African nation appeared to carry little weight in Gulf markets.

Qatar's benchmark was up 2.56 percent while the main index in Oman, another Gulf nation that has seen smaller-scale protests, was up 1.33 percent. Abu Dhabi's benchmark gained a moderate 0.67 percent.

Bahrain has, for weeks, been the epicenter of Gulf concerns.

The tiny island nation linked to Saudi Arabia by a causeway has been embroiled in what has emerged as a largely sectarian conflict, with the majority Shiites demanding greater rights and opportunities from the Sunni monarchy.

With the protests heating up, Gulf nations deployed a regional security force in Bahrain — a move intended to show their resolve to act as a united bloc in the face of what they described as foreign interference. The phrase was a clear reference to Iran, which is seen as backing fellow Shiites in the predominantly Sunni region.

They also announced a $20 billion economic aid package for Oman and Bahrain — the poorest of the six-nation Gulf Cooperation Council.

Abdullah had about three weeks ago announced a roughly $36 billion package of incentives targeting Saudi Arabia's lower-income bracket. The latest measures are more far-reaching, and include 60,000 new jobs in the security forces, additional wages for government workers and payments to university students and raised the minimum wage.

The brunt of the funds, however, were aimed at building about 500,000 apartments for low-income residents.

Analysts said with the rise in oil prices — currently over $100 per barrel — and the kingdom's more than $430 billion in foreign reserves, Saudi Arabia should have little trouble in funding the programs. But whether throwing money at a problem that is as rooted in political discontent as it is economic factors can succeed remains to be seen.

"It's clearly a case of do you spend or don't spend," said Sfakianakis. "The cost of not spending is far higher than anything else."

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Major Gulf Arab stock markets rallied on Sunday, led by Saudi Arabia's exchange after that nation's king pledged roughly $93 billion in financial support measures in a move aimed at quieting discontent in the Arab world's biggest economy. Saudi Arabia's Tadawul All Shares...
Gulf,Markets,Rally,saudi,Economic,Incentives
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2011-15-20
Sunday, 20 Mar 2011 02:15 PM
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