Real economic growth in Saudi Arabia is forecast to grow by 3.8 percent in 2010, as opposed to 0.15 percent in 2009, according to Riyadh-based Jadwa Investment.
The merchant bank also stated that it expects the Saudi stock market index (TASI) to grow by ten percent from its current level during the course of the year, to 7,400 points, with earnings per share to rise 8.2 percent.
However, Saudi investors will remain cautious about the stock market, and the TASI is still 70 percent below its peak. Jadwa warned.
“We think the market is likely to record steady gains over the year, rather than the spectacular leaps seen over the period from 2003 to early 2006 when many investors first entered the market,” the institution’s March research note indicated.
Breaking down its predictions further by sector, Jadwa said that projected earnings per share growth would be highest in the multi-investment and petrochemicals segments.
But the bank also reminded its clients that high earnings per share growth wasn’t necessarily a strong reason for investment.
“One of the sectors we find most attractive for investors – telecoms – is expected to record negative earnings per share growth in 2010,” the statement said.
“We favour telecoms because it looks appealing on a valuation basis even if lower earnings are factored in.”
Jadwa also earmarked banks and real estate amongst its favoured sectors, arguing that market concerns about both these segments’ future performance were “overdone”.
It pointed out that most banks have the bulk of their provisioning behind them, and that real estate firms were attractively valued even assuming a fall in land prices.
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