LONDON: Saudi insurance stocks surged on Sunday, with investors expecting the sector to reap significant dividends following the lifting of the ban on female drivers.
Insurance stocks — one of the worst performing sectors on the Saudi bourse for the year to date — outperformed other classifications on Sunday, ending 2.4 percent higher, compared with a 1.8 percent rise for the Kingdom’s headline index.
Amana Insurance and AlRajhi Takaful were the best performers of the day, gaining 9.9 percent each. Tawuniya, the Kingdom’s largest insurer, ended Sunday 1.1 percent higher, with only one of the country’s 33 listed insurance providers closing lower for the day.
The lifting of restrictions on female drivers — which came into effect on Sunday after first being announced in September — is part of a series of wide-ranging reforms introduced as part of Saudi Arabia’s Vision 2030 economic transformation program, designed to diversify the economy away from a reliance on oil revenues.
The advent of women drivers is forecast to benefit the economy by significantly increase female participation in the workforce, and stimulating financial, insurance and retail sectors among others.
The insurance sector is set to draw particular benefit from the move, but may remain under pressure, according to rating agency S&P.
“We anticipate that efforts of the local authorities to tackle the large number of uninsured drivers, combined with the arrival of women drivers … and the introduction of additional benefits under the unified medical policy from July 1, will support further premium growth in the industry in the medium term,” said S&P in a research note in April.
“However, these factors may be offset by the large number of foreign workers that have already left or will be leaving the Kingdom in 2018.”
In spite of yesterday’s price surge, insurance stocks are 8.4 percent lower for the year to date. Tadawul as a whole is up 15.6 percent so far this year, making the bourse one of the world’s best performers for 2018.
Investor sentiment on Sunday was also boosted by investor optimism after index provider MSCI announced last week that it would upgrade Saudi stocks to its Emerging Markets Index from next year.
The widely anticipated upgrade — which puts Saudi equities on an index tracked by around $2 trillion worth of global assets — is expected to attract up to $40 billion of international funds, Tadawul CEO Khalid Al-Hussan told Arab News last week.
MSCI’s upgrade came after a similar move by fellow index provider FTSE Russell in February, which is also scheduled to come into effect from next year.
Banks were among the other bright performers on Tadawul on Sunday. Arab National Bank led gains, closing up 4.2 percent, while blue-chip names NCB and AlRajhi rose 1.6 percent and 2.3 percent respectively.
Some petrochemical companies also added value, Reuters reported, following a rise in oil prices after OPEC decided on only modest increases in crude production last week.
Outside Saudi Arabia, Gulf markets posted minor gains. In Dubai, where the index was flat, Air Arabia was unchanged. Shares in the airline have declined by more than 10 percent since early last week, when the company said it had hired experts to protect its business interests in private equity firm Abraaj, which has filed for provisional liquidation. The airline said its exposure was around $336 million.
Last week, the UAE’s securities regulator asked listed companies to declare their exposure to Abraaj.
Saudi insurance stocks soar as female drivers take to the road
Saudi insurance stocks soar as female drivers take to the road
Related
Oil Updates — crude set for 3rd straight weekly gain on winter fuel demand
LONDON: Oil prices rose in early Asian trade and were on track for a third straight week of gains with icy conditions in parts of the US and Europe driving up fuel demand for heating.
Brent crude futures climbed 40 cents, or 0.5 percent, to $77.32 a barrel at 9:02 a.m. Saudi time. US West Texas Intermediate crude futures gained 38 cents, also 0.5 percent, to $74.30.
Over the three weeks ending Jan. 10, Brent has advanced 6 percent while WTI has jumped 7 percent.
Analysts at JPMorgan attributed the gains to growing concern over supply disruptions due to tightening sanctions, amid low oil stockpiles, freezing temperatures in many parts of the US and Europe and improving sentiment regarding China’s stimulus measures.
The US weather bureau expects central and eastern parts of the country to experience below-average temperatures. Many regions in Europe have also been hit by extreme cold and will likely continue to experience a colder-than-usual start to the year, which JPMorgan analysts expect to boost demand.
“We anticipate a significant year-over-year increase in global oil demand of 1.6 million barrels a day in the first quarter of 2025, primarily boosted by ... demand for heating oil, kerosene, and LPG,” JPMorgan said in a note on Friday.
Meanwhile, the premium of the front-month Brent contract over the six-month contract reached its widest since August this week, potentially indicating supply tightness at a time of rising demand.
Oil prices have rallied despite the US dollar strengthening for six straight weeks. A stronger dollar typically weighs on prices, as it makes purchases of crude expensive outside the US.
Supplies could be further hit as US President Joe Biden is expected to announce new sanctions targeting Russia’s economy this week in a bid to bolster Ukraine’s war effort against Moscow before President-elect Donald Trump takes office on Jan. 20. A key target of sanctions so far has been Russia’s oil industry.
“Uncertainty over how hawkish Trump will be with Iran will be providing some support. Asian buyers have already been looking for alternative grades from the Middle East, with broader sanctions against Russia and Iran making this oil flow more difficult,” ING analysts said in a note on Friday.
SABIC, Almarai, SEC able to absorb fuel price hike: S&P Global
RIYADH: Major Saudi companies, including chemical company SABIC, dairy firm Almarai, and Saudi Electric Co., are well-positioned to handle the impact of higher fuel and feedstock prices introduced on Jan. 1, according to a new report.
Released by capital market economy firm S&P Global, the analysis reveals that those corporates will be able to absorb the marginal increase in production costs by further improving operational efficiencies as well as potentially via pass-through mechanisms.
This came after Saudi Aramco increased diesel prices in the Kingdom to SR1.66 ($0.44) per liter, effective Jan. 1, marking a 44.3 percent rise compared to the start of 2024. The company has kept gasoline prices unchanged, with Gasoline 91 priced at SR2.18 per liter and Gasoline 93 at SR2.33 per liter.
Despite the hike, diesel prices in Saudi Arabia remain lower than those in many neighboring Arab countries. In the UAE and Qatar, a liter of diesel is priced at $0.73 and $0.56, respectively, while in Bahrain and Kuwait, it costs $0.42 and $0.39 per liter.
“For SABIC and Almarai, the increase in feedstock prices will not affect profitability significantly. In the case of utility company, SEC, additional support will likely come from the government if needed,” the report said.
The capital market economy firm projects that SABIC will continue to outperform global peers on profitability.
“We don’t expect the rise in feedstock and fuel prices to materially affect profitability, since the company estimates it will increase its cost of sales by only 0.2 percent,” the report said.
It further highlighted that SABIC is considered a government-related entity with a high possibility of receiving support when needed.
The report also underlines that Almarai anticipates an additional SR200 million in costs for 2025, driven by higher fuel prices and the indirect effects of increased expenses across other areas of its supply chain.
“We believe Almarai will continue focusing on business efficiency, cost optimization, and other initiatives to mitigate these impacts,” the release stressed.
With regards to SEC, S&P said that an unrestricted and uncapped balancing account provides a mechanism for government support, including related to the higher fuel costs.
“We believe any increased fuel cost will be covered by this balancing account,” the report said.
The study further highlights that the marginal increase “could significantly affect wider Saudi corporations’ profit margins and competitiveness.”
The S&P data also suggests that additional costs will be reflected in companies’ financials from the first quarter of 2025.
“Saudi Arabia is continuing its significant and rapid transformation under the country’s Vision 2030 program. We expect an acceleration of investments to diversify the Saudi economy away from its reliance on the upstream hydrocarbon sector,” the report said.
“The sheer scale of projects — estimated at more than $1 trillion in total — suggests large funding requirements. Higher feedstock and fuel prices would help reduce subsidy costs for the government, with those savings potentially redeployed to Vision 2030 projects,” it added.
Lenovo to produce ‘Saudi Made’ PCs by 2026 following $2bn Alat deal closure
RIYADH: Chinese tech giant Lenovo is set to manufacture millions of computer devices in Saudi Arabia by 2026, following the completion of a $2 billion investment deal with Alat, a subsidiary of the Public Investment Fund.
First announced in May, the partnership has now received shareholder and regulatory approvals, paving the way for Lenovo to establish a regional headquarters and a manufacturing facility in the Kingdom.
The deal marks a significant step in aligning Lenovo’s growth ambitions with Saudi Arabia’s Vision 2030 goals of economic diversification, innovation, and job creation, the company said in a press release.
The factory will manufacture millions of PCs and servers every year using local research and development teams for fully end-to-end “Saudi Made” products and is expected to begin production by 2026, it added.
“Through this powerful strategic collaboration and investment, Lenovo will have significant resources and financial flexibility to further accelerate our transformation and grow our business by capitalizing on the incredible growth momentum in KSA and the wider MEA region,” Yang said.
He added: “We are excited to have Alat as our long-term strategic partner and are confident that our world-class supply chain, technology, and manufacturing capabilities will benefit KSA as it drives its Vision 2030 goals of economic diversification, industrial development, innovation, and job creation.”
Amit Midha, CEO of Alat, underscored the significance of the partnership for both Lenovo and the Kingdom.
“We are incredibly proud to become a strategic investor in Lenovo and partner with them on their continued journey as a leading global technology company,” said Midha.
“With the establishment of a regional headquarters in Riyadh and a world-class manufacturing hub, powered by clean energy, in the Kingdom of Saudi Arabia, we expect the Lenovo team to further their potential across the MEA region,” he added.
The partnership is expected to generate thousands of jobs, strengthen the region’s technological infrastructure, and attract further investment into the Middle East and Africa, according to the press release.
In May, Lenovo raised $1.15 billion through the issuance of warrants to support its future growth plans. The initiative, which was fully subscribed by investors, signals confidence in Lenovo’s strategic approach and its plans for global expansion.
The investment deal was advised by Citi and Cleary Gottlieb Steen & Hamilton for Lenovo, while Morgan Stanley and Latham & Watkins represented Alat.
Lebanon’s bonds climb as parliament elects first president since 2022
LONDON: Lebanon’s government bonds extended a three-month long rally on Thursday as its parliament voted in a new head of state for the crisis-ravaged country for the first time since 2022.
Lebanese lawmakers elected army chief Joseph Aoun as president. It came after the failure of 12 previous attempts to pick a president and the move boosts hopes that Lebanon might finally be able to start addressing its dire economic woes.
Lebanon’s battered bonds have almost trebled in value since September when the regional conflict with Israel weakened Lebanese armed group Hezbollah, long viewed as an obstacle to overcoming the country’s political paralysis.
Most of Lebanon’s international bonds, which have been in default since 2020, rallied after Aoun’s victory was announced to stand between 0.8 and 0.9 cents higher on the day and at nearly 16 cents on the dollar.
They have also risen almost every day since late December, although they remain some of the lowest priced government bonds in the world, reflecting the scale of Lebanon’s difficulties.
With its economy still reeling from a devastating financial collapse in 2019, Lebanon is in dire need of international support to rebuild from the war, which the World Bank estimates to have cost the country $8.5 billion.
Closing Bell: Saudi main index closes in green at 12,097
RIYADH: Saudi Arabia’s Tadawul All Share Index rose on Thursday, gaining 9.01 points, or 0.07 percent, to close at 12,097.75.
The total trading turnover of the benchmark index was SR7.48 billion ($1.99 billion), as 96 stocks advanced, while 133 retreated.
The MSCI Tadawul Index decreased by 3.28 points, or 0.22 percent, to close at 1,510.14.
The Kingdom’s parallel market, Nomu, surged, gaining 251.24 points, or 0.82 percent, to close at 31,027.39. This comes as 56 of the listed stocks advanced, while 32 declined.
The best-performing stock was Nice One Beauty Digital Marketing Co. for the second day in a row, with its share price increasing by 7.69 percent to SR49.
Other top performers included Fawaz Abdulaziz Alhokair Co., which saw its share price rise by 6.5 percent to SR14.74, and Abdullah Saad Mohammed Abo Moati for Bookstores Co., which saw a 4.42 percent increase to SR35.45.
Arabian Pipes Co. and Dr. Sulaiman Al Habib Medical Services Group also saw positive change with their share prices moving up by 4.10 percent and 3.89 percent to SR12.70 and SR298.80, respectively.
The worst performer of the day was Salama Cooperative Insurance Co., whose share price fell by 5.88 percent to SR19.52.
Almoosa Health Co. and Al Hassan Ghazi Ibrahim Shaker Co. also saw declines, with their shares dropping by 5.13 percent and 3.91 percent to SR133.20 and SR28.25, respectively.
On the announcements front, Riyad Bank declared its intention to fully redeem its $1.5 billion fixed-rate reset tier 2 sukuk, issued in February 2020, on Feb. 25, 2025.
According to a Tadawul statement, the sukuk originally maturing in 2030, will be redeemed at face value in accordance with the terms and conditions. The redemption, approved by the regulators, will include any accrued but unpaid periodic distributions.
On the redemption date, Riyad Sukuk Limited will deposit the full amount into the accounts of sukuk holders, marking the completion of the issuance. This redemption will conclude the sukuk’s life, with no remaining value post-redemption.
Riyad Bank ended today’s trading session edging up by 0.91 percent to SR27.85.
