CAIRO, (Reuters) – The Saudi stock market will see more gains in 2011 after outperforming most Gulf markets this year as companies benefit from high oil prices, a record budget and global recovery, analysts and investors said.

The biggest Arab bourse has risen some 8 percent this year and investors see more gains next year as oil prices hover around $90, while the top OPEC exporter is rolling out a $400 billion stimulus, the world’s biggest relative to GDP.

On Monday, the kingdom said it would spend $155 billion in 2011, mainly on education and infrastructure.

The main benchmark .TASI could hit 7,000 points within two months, said Youssef Kassantini, chief executive at Bourse Experts, citing a stock market correlation of about 74 percent with oil prices. It closed Wednesday at 6,610.

“The investment environment will help as Saudi’s record budget and spending should act as a catalyst to TASI,” he said.

Saudi’s stock market benchmark would reach 7,000-7,100 in the first quarter of 2011 and top 9,000 by the end of the year, said Mohamed El Aasar, chief technical analyst at EFG-Hermes.

“The Saudi stock market is well positioned to harvest good gains, especially from petrochemicals, banks and telecoms, and should fare well in 2011,” Kassantini said.

Despite a 5 percent gain in the banking index some banking shares are still cheaper than peers in the Gulf.

Riyad Bank 1010.SE has a price-to-earnings (PE) ratio of 13.4, while Samba Financial Group trades at 12.3 times 2010 earnings, according to Thomson Reuters data. National Bank of Kuwait has a PE ratio of 15.9.

“The index will fare better (in 2011) as banks recover … Banking will be among the sectors investors bet on during 2011,” said Turki Fadaak, financial analyst and member of the Saudi Economic Association, a semi-official think-tank.

The banking index, which ended Wednesday at 16,524, could hit 16,900 in the first quarter of next year and see a 10 percent rise by end-2011, said Aasar.

With oil prices expected to stay high, the petrochemical sector should also be a strong performer in 2011, analysts said.

Jumping 21 percent this year the petrochemical index — whose biggest stock is Saudi Basic Industries Corp – might gain 25-30 percent next year, they said. It ended Wednesday at 6,506.

“(Petrochemicals) should target 6,720 points in the first quarter and end 2011 at 8,400-8,500 points,” Aasar said.