Gulf may consolidate as investors eye earnings
Stock markets in the Gulf may rise on Monday as oil prices stabilise over $42 a barrel, encouraging investors to focus on long-term fundamentals.
Riyadh’s index will continue to be driven by earnings announcements, which have already set the tone for how companies in the kingdom are performing in light of a slowing business cycle and lower hydrocarbon dollars.
“Jarir and Almarai’s results were the canaries in the coal mine for the discretionary and non-discretionary Saudi sectors,” said a Riyadh-based analyst.
Jarir, a giant retailer which sells electronics and stationeries, reported on Sunday a net income drop of nearly 30 percent which fell short of analyst expectations, although sales turnover were not as extreme as the company had previously guided.
“The 26 percent drop in revenue is better than the initial 30 percent decline management estimated and our forecast of 28 percent,” Riyad Capital said in a note.
But it still indicated a marked discretionary spending slowdown in the economy, particularly on non-essential items such as electronics. This dragged other discretionary names lower, as investors began to rebalance their portfolios in favour of stocks that offer long-term growth potential.
The largest dairy producer in the Gulf, Almarai, however, surprised to the upside after reporting a slight rise in first-quarter net profit in a challenging market. The 4.2 percent jump in its shares on Sunday also helped the sector jump by the same percentage.
Dubai’s Emaar Properties may fall out of favour with investors after the company said on Sunday that Abdulla Lahej had discontinued his role as group chief executive officer, adding the group chief operating officer will be handling the role, without elaborating further. Shares were up 2.2 percent on Sunday.