3.4 billion dollars in purchases.. the return of foreign flows to Saudi shares

Foreigners have returned to buying Saudi stocks after their decline last month, as investors balance the attractive valuations of the shares against the impact of the war between Israel and Hamas.

For the second week in a row in November, foreigners recorded net inflows and outflows to the market, after October recorded the highest monthly rate of decline in foreign net investments this year, according to stock exchange data, according to Bloomberg today, Wednesday, November 15, 2023.

Foreign flows to Saudi stocks

Foreign investors bought 12.7 billion riyals ($3.4 billion) worth of Saudi stocks so far in November, after selling 26 billion riyals the previous month, resulting in net outflows.

Christian Ghandour, chief portfolio manager at Al-Dhabi Capital said: Valuations in the Kingdom of Saudi Arabia are not greatly exaggerated, If the market's prospects for geopolitical risks decrease significantly, we may see more flows to the regional markets.

The war between Israel and Hamas affected the Middle East markets last month in general. And the desire to take risks was influenced by fears that the situation could escalate into a wider conflict. Unstable oil prices and signs of a slowdown in the local economy still cloud the picture for investors.

However, Saudi Arabia's main Tadawul index has recovered from recent declines and is up 3.6% this year so far, outperforming MSCI's emerging market index.

While the gross domestic product of the Kingdom of Saudi Arabia contracted in the third quarter due to the decline of the oil economy following production cuts, the non-oil economy, supported by efforts to promote new industries such as tourism and manufacturing, recorded gains. And the diversification plans, led by Crown Prince and Prime Minister Prince Mohammed bin Salman worth trillions of dollars, were the main driver of employment.

Inflation rate

On the other hand, the inflation rate in Saudi Arabia in October continued its slowdown for the fifth month in a row, recording 1.6%, down from 1.7% in September, according to what the General Authority for Statistics in the Kingdom announced today, Wednesday.

This is the lowest rate of inflation since almost two years when it also reached 1.6% in February of last year.

According to the data of the Statistics Authority, the decline was driven by the contraction in the prices of vehicle purchases, which represent 8.3% of the weight of the index, by 1.1% compared to its increase of 5.8% in October of last year, which is the largest contraction since November 2019, along with the slowdown in the increase in food and beverage prices that make up 17 % of the index weight, to 0.6% from 4.6% in October 2022.

In September, the consumer price index in Saudi Arabia recorded its lowest level since February 2022 at 1.7%, against the background of the slowdown in rents, which make up 21% of the weight of the index, after the growth rate of rents paid for housing in September reached 9.76%, which is the lowest level since April 2022.