The Saudi stock exchange benefited from a 50-basis point cut in US interest rate, with its main index (TASI) surging on Thursday.
Market Optimism
TASI closed in the green for the third consecutive session, gaining 159.53 points.
It ended last week at 12,080 points, with trading volumes reaching SAR 9.4 billion (USD 2.5 billion).
152 companies saw their share value increase, while 73 companies saw declines.
So what
The 1.3% jump in the main market index was supported by a 1.1% rise in heavyweight Aramco.
Additionally, Al Rajhi Bank shares saw a 2% hike.
The companies that saw the most gains on Thursday were shares of Etihad Atheeb Telecommunication, Red Sea International, Saudi Automotive Services, Jamjoom Pharma, and MEPCO.
Conversely, Al Baha Investment & Development, Saudi Enaya Cooperative Insurance, Saudi Industrial Development, Bonyan REIT, and Nayifat Finance incurred the largest losses.
Gains and losses ranged between 7.95% and 5.88%.
Some context
GCC countries generally follow the U.S. Federal Reserve’s monetary policy moves since most of their currencies are pegged to the dollar.
The Saudi Central Bank (SAMA) reduced the repo rate by 50 basis points to 5.50%.
The reverse repo rate was also cut by 50 basis points to 5%.
Meanwhile, oil prices, a key driver of Gulf financial markets, surged after the U.S. rate cut.
However, Brent crude is still at its lowest level this year, trading below USD 75 per barrel amid expectations of weak global demand.
Now what
Thamer AlSaeed, Head of Asset Management at Rassanah Capital, believes the rate cut will benefit several bourse-listed companies operating across different sectors.
These include retail, construction, telecommunications, and industrial and petrochemical companies, usually taking on debt to finance their expansions.
In an interview with Al Arabiya Business, AlSaeed added that companies’ profit margins are expected to improve after a “successive pace” of interest rate hikes.
