Bloomberg

Saudi Stocks Jump as Prince Says Vision Won’t Need High Spending

Dana El Baltaji DEBaltaji

April 25, 2016 

• Saudi Arabia Prepares for a Post-Oil Economy
• Kingdom pledges to press ahead with infrastructure projects

Saudi Arabian stocks surged the most in seven weeks on relief that the nation’s plan to prepare for a post-oil era won’t depend on excessive government spending.

The Tadawul All Share Index added 2.5 percent to 6,868.09 at the close in Riyadh as the volume of shares traded soared to the highest in four years. Jabal Omar Development Co., a real estate developer, led advancers as almost two stocks rose for every one that fell. The nation’s Vision 2030 won’t require high state expenditure, and the kingdom will press ahead with infrastructure projects, Saudi Deputy Crown Prince Mohammed bin Salman said in a televised interview with Al Arabiya TV.

“The fact that this plan won’t be a drain from a tax point of view is a huge relief for Saudis and Saudi companies,” said Sebastien Henin, the head of asset management at The National Investor in Abu Dhabi. “From a political point of view, this will help the government keep the support of its people as it transitions its economy away from oil.”

The world’s biggest crude exporter is seeking to reduce its reliance on oil after a slump in prices put pressure on the nation’s finances. While the benchmark index last week followed stocks in Qatar and the United Arab Emirates into a bull market as oil prices recovered about 60 percent since January, its correlation with crude has reduced the gauge’s lure to investors.

Overbought

The rally on Monday erased losses of as much as 0.8 percent and boosted the gauge’s 14-day relative strength index to 75, the highest level since September 2014. A reading above 70 is a signal to some analysts that a measure is overbought and poised to decline.

The relative-strength indexes of the companies that were the largest contributors to the benchmark gauge’s gain were also above 70. Mecca-based Jabal Omar Development’s stock climbed the most in three months, Saudi Basic Industries Corp. recorded the biggest jump since August and Al-Rajhi Bank closed at an eight-month high.

The kingdom’s plan to sell less than 5 percent in Saudi Arabian Oil Co., valued at approximately $2 trillion, in an initial public offering will help boost transparency, the prince said. The nation also seeks to raise home ownership from the current 47 percent and plans to boost the share of non-oil exports to 50 percent from 16 percent, he said.

“Overall it’s encouraging that they’re ahead of the market, taking action and announcing its plan to the general public,” said Muhammad Shabbir, the Dubai-based head of equities and funds at Rasmala.