The Saudi stock market is stabilizing and is unlikely to see a major correction soon, said the chief executive of a local investment bank that is raising cash for its first equity fund aimed at local stocks. Watan Investment opened subscriptions on Saturday for the five-year Nakhil fund, its first since the bank was licensed by regulators a year ago, Ihsan Bu-Hulaigah told Reuters on Tuesday. Subscription to the fund, which is open to both local and foreign investors, will close by the end of June and the minimum subscription is fixed at SR10,000 ($2,667). “We are telling our investors that the market is stabilizing, this is good time, the valuations are good, but if you are in a hurry this is not the kind of fund for you,” he said on the sidelines of an investment conference. The fund is focusing on “dividend yield and investment grade companies.” “It will be able to buy good opportunities because of the situation. We don't think we will have another major correction in the near future. Judging by its performance since the beginning of the year, the market is holding up,” he said. Against the global negative trend, the Saudi benchmark Tadawul All Share Index (TASI) closed 0.94 percent at 5,471.9 points on Tuesday. Market bellwether Saudi Basic Industries Corporation (SABIC) advanced 0.42 percent. Investment firm Kingdom Holding rebounded, gaining by 9.89 percent. All sector indices added value. TASI gained 13.9 percent since the start of this year after it lost about 55 percent of its value in 2008 and another 50 percent over the previous 22 months. “It is stabilizing,” Bu-Hulaiga said. “It may go down but not by much ... now the price-to-earning ratios are very attractive for blue-chips and profitability is there”. “The economy is expanding, the fundamentals are there. This is the market of a growing economy even though the GDP growth is slowing down still the economy is not contracting,” he said. Meanwhile, Saudi Arabia's the Middle East's largest economy, will recover “more quickly” than other Gulf countries because of “satisfactory” liquidity and business confidence, Standard & Poor's Ratings Services said. The IPOs on the Saudi bourse this year indicate local investors have “considerable liquid assets with which to support attractive business propositions,” S&P said. “Deposit rates at local banks remained low, indicating that liquidity has been satisfactory and confidence maintained.” The Kingdom will spend $400 billion over the next five years to stimulate the economy, while the fiscal stimulus plan next year will consume 3.5 percent of gross domestic product. “It is testament to the underlying strength of the national economy and to the quality of both management and regulation that no Saudi-based insurers or banks have succumbed to serious financial difficulties during the current economic turmoil,” S&P said. In April, five Saudi insurers will raise SR260 million ($69 million) through public share sales, according to the S&P report. The fundamental strength of the economic base throughout “this period of boom and bust is indicated by S&P's consistent, very strong AA-/Stable/A-1+ sovereign credit ratings on the country,” it said.
