Qatar Stock Exchange index rose 0.7 percent on Monday, its third consecutive session of gains, with advancing shares outnumbering fallers 13-to-6. Commercial Bank was the top gainer, adding 1.8 percent.
Saudi banking shares rallied on Monday after the central bank said it would deposit about 20 billion riyals ($5.3 billion) at commercial lenders and introduce two new money market instruments to fight a surge in market interest rates caused by low oil prices.
Riyadh’s main index climbed 0.7 percent as three-quarters of the banking shares rose. Blue-chip lenders Samba Financial Group and National Commercial Bank gained 1.7 percent and 2.7 percent respectively.
Banking shares have been underperforming the general index for several months, hit by an illiquid construction sector, which makes up a large portion of corporate loans. Samba, for example, is trading at a 26 percent discount to its average fair value as estimated by 13 analysts, according to Reuters data.
Analysts believe the central bank’s decision offers a temporary reprieve but more ought to be done to sustain a rally.
“Yes the central bank injecting 20 billion riyals is a positive move for Saudi banks but in the present context, more needs to be done to help banks, such as increasing the loan-to-deposit limit,” said Sanyalaksna Manibhandu, head of research at NBAD Securities.
“The government needs to tap the international bond market sooner than later and help boost the liquidity of the banking system. Reviving and launching capital projects and ensuring contractors get paid for their work would also help the economy and banks.”
Mohammad Al-Shammasi, chief investment officer at Riyadh-based Derayah Financial, echoed the same concern over the advances-to-deposit ratio. He said that while some lenders are close to the upper limit, there needs to be greater flexibility for them to mobilise funds towards more productive use, which would help revitalise the economy and support their earnings growth.
“So far the credit markets have not reacted much to the news, but this is what we are going to keep a close look out for,” Al-Shammasi added.
The three-month Saudi Interbank Offer Rate, SIBOR, which is up about 1 percentage point since the start of the year, did not ease from the previous session.
The petrochemical industry fared well on Monday, with its largest producer Saudi Basic Industries rising 0.9 percent as Brent futures climbed back over $46 a barrel. Oil producers are set to meet in Algeria over the coming days.
Elsewhere, Dubai’s stock index edged up 0.04 percent as builder Drake and Scull, the most traded stock, climbed 2.6 percent. Some large cap shares also outperformed, with Emaar Properties adding 0.3 percent and its affiliate Emaar Malls Group gaining 0.7 percent.
Declines in bluechip banks weighed on Abu Dhabi’s index , which slipped 0.1 percent. Abu Dhabi Commercial Bank fell 0.9 percent and First Gulf Bank lost 0.4 percent.
In Egypt, the main index added 0.9 percent. Commercial International Bank, the largest listed bank stock and a favourite of foreign funds, jumped 3.2 percent.
But monthly activity is below August’s level, a sign that investors are waiting for final confirmation from the International Monetary Fund of a $12 billion loan to Egypt, a deal which has been in the making for the last eight weeks.