The volatile Saudi Arabian stock market, which lost 50% of its value in a steep correction in 2006, has staged a strong recovery, helped by rising oil prices and investor demand for financial issues. MSCI Barra, which launched equity indexes for the countries of the Gulf Cooperation Council in January 2006, said its GCC countries index returned 6.86% in February 2007. In the same period the MSCI World index was down 1.31%.
The MSCI Saudi Arabia index delivered the best performance of the GCC countries in February, with a return of 11.84%. The weakest performance was from the MSCI Oman index, which fell 1% in February.
Last year’s collapse in share prices knocked more than $500 billion off the capitalization of the Saudi stock market, according to Brad Bourland, chief economist at Samba Financial Group in Riyadh.
Samba Financial forecasts the Saudi financial sector to perform strongly this year. New regulations will cause a major change in investment banking. Commercial banks must move their investment banking operations into separate institutions and obtain individual licenses for brokerage, asset management, custody, advisory services and securities arranging by the end of June.