The top five gainers in Riyadh this year include a small insurer, a supermarkets owner, a plastic producer, an education company and a hospital operator. They don’t exactly boast a track record of consistent success between them: the first four haven’t broken into the top five in any quarter since 2016, while the last has just made its market debut.
The diverse group of market leaders underscores how hard investors have had to look for bright spots among equities trading in the world’s biggest oil exporter. The local market has been battered by the global stocks slump caused by the coronavirus crisis, and a price war over crude between the kingdom and Russia that has weighed on Saudi Aramco (SE:2222), which accounts for 11% of the main index.
“Definitely, these are very unusual circumstances all around us,” said Muhammad Faisal Potrik, the head of research at Riyad Capital. “Consumer staples, utilities, health-care and telecoms will turn out relatively better performance, given that these business are not as affected.”
Saudi Arabia took the rare step of suspending religious pilgrimages and locked down the Islamic holy cities of of Mecca and Medina to curb the disease’s spread. The Tasawul All Share Index has dropped 24% in 2020, headed for its worst quarterly performance since the end of 2008. Just 11 of its 199 members had posted gains this year, as of Monday’s close.
Saudi Aramco is about to wrap up its first full quarter of trading, with a decline of 15%, a weak performance shared with the country’s major petrochemical companies. Saudi Arabia said last week that it had had no contact with Russia about ending their standoff over making production cuts that could boost oil prices and support the local equity market.
But even though Aramco is languishing below its initial public offering price, its shares are still faring better than major global competitors in developed and emerging economies.
Citigroup Inc (NYSE:C). analyst Alastair Syme said earlier this month that among emerging market oil companies, Aramco is alone in offering payout stability through its guaranteed dividend for minority shareholders, which are in place until 2024.
©2020 Bloomberg L.P.