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Saudi shares rise at expense of real estate sector - ASHARQ AL-AWSAT English Archive
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Traders inspecting the Saudi market prices (Asharq Al-Awsat)

Traders inspecting the Saudi market prices (Asharq Al-Awsat)

Riyadh, Asharq Al-Awsat—Long-term investment is currently going through major changes within the Saudi stock market, according to experts who spoke to Asharq Al-Awsat yesterday. They confirmed that the country’s stock market has started to outperform the real estate market off the back of increased investment. This comes amid a noticeable stagnation in the Saudi real estate sector.

The experts also pointed out that many companies which are listed in the Saudi market have distributed annual profits of between 5 percent and 8 percent, amid expectation of a good return on capital, especially with the start of a new cycle of the Saudi stock market, which opened at 6,800 points at the start of the current year.

They added that investment in the real estate sector was risky at the current time. These comments came at a time when the Ministry of Housing has started to take effective measures to address the housing problem.

Amid great interest from the Custodian of the Two Holy Mosques, who recently approved the “Ard wa Qard” (Land and Loan) project, investors and individuals were divided on the possibility of an adjustment of real estate prices taking place. Some economic experts however, previously spoke about the expected burst of the real estate bubble, amid a long period of recession which has prevailed over the local markets.

Meanwhile, Fadil Bouainayn, economic and financial expert told Asharq Al-Awsat: “I can say that the investment return of some companies which are listed on the Saudi market, have actually become more secure and profitable than that the real estate market.”

He added that the stock market was more attractive to most investors who were looking for stocks with a vision of long-term investment.

Bouainayn said the stock market was still at the start of a new cycle, adding that “stocks are so far close to the lower levels, while the real estate is at the top.” He also emphasized that what distinguishes the stock market is the ease of collecting investment returns, especially given that there is no mechanism to collect debts or fees.

On the decline of the market index on Monday by more than 90 points, Bouainayn stressed that this was a natural decline due to the effects of profit-taking which the market began to yield at the start of dealings on Sunday. He added that the rise in the market index from 6,800 points to 8,200 points, with no repeat profit-taking processes, had contributed to the sharp decline yesterday.

Meanwhile, the Saudi stock market closed on Monday on a sharp drop of around 75 points, which resulted in a decline of 0.93 percent, causing the general index to close at 8,054 points, with cash dealings of USD 1.6 billion.

Ali Al-Harbi, a real estate trader in Riyadh, said there was a notable decline in real estate deals. He said: “This decline comes amid an increase in supply and a decline in demand, especially with rumors about the possibility of the real estate bubble bursting soon, but I think the reality of that will become clear over the next few months.”

This comes at a time when Saudi Arabia has started completing its first steps to activate the “Ard wa Qard” project, in order to resolve the housing problem. Minister of Housing Shwaish Al-Dhwaihy last week signed eight contracts valued at around USD 1 billion to develop a land area of 26 million square meters in various locations.

These contracts will provide developed land in a number of cities to absorb 250,000 people. These steps were completed following instructions from the Custodian of the Two Holy Mosques, King Abdullah bin Abdulaziz, to provide developed land and loans for people to build on them, with the Ministry of Housing being the government agency in charge.

The Saudi financial authority last month confirmed that dealers and investors in the local financial market were given the right to make official complaints if they were subjected to fraud or deception, or any unfair practices, during their dealings in the local market, which shows an increase in the level of transparency.

According to information obtained by Asharq Al-Awsat, the stock market authority intends to open the door to investors and individuals, to make complaints, and thus have violators punished, amid clear indications that the market authority, with its new management, intends to be involved in the daily operations, and that it will intervene if there are clear violations which harm the interests of dealers and their finances.

The market authority, in a previous statement, said dealers and investors in the stock market had the right to bring complaints to the authority if they were subjected to fraud or deception, or any unfair practices, during their dealings in the local market, or if they had disagreements with people who were licensed to open accounts, or manage portfolios or investment funds. The market authority stressed that “the complaints will be looked at, studied, followed up, and properly investigated, to verify they are valid, before steps are taken according to the complaint.”