Financial Analyst Al-Zahrani Explains Saudi Market Liquidity Shift, Predicts Improvement
RIYADH – Financial Advisor Ali Al-Zahrani, speaking on Al-Ikhbaria Channel as reported by Al-Marsad newspaper, attributed recent institutional selling and capital outflow from the Saudi stock market to opportunities in global markets. He indicated a gradual market improvement is anticipated starting in the next quarter.
Al-Zahrani noted that significant liquidity typically doesn’t increase during steep market declines. He highlighted that the market index has reached a price-to-earnings ratio of less than 15, often signaling favorable buying conditions. he added that sales levels are considered appropriate when the index exceeds 22 to 26, benchmarks used when comparing high-liquidity markets.
The analyst explained the recent liquidity exit was driven by negative performance in certain sectors and pending initial public offerings, with the Capital Market Authority currently reviewing over 50 applications. He also stated that some funds sought to capitalize on negative trends in other active markets, with global markets achieving record highs, prompting a search for investment and speculative opportunities, including a reported shift of liquidity towards the American market and others.
Al-Zahrani expressed optimism, stating data suggests a positive trend with the potential return of liquidity and increased purchasing. He anticipates this improvement will continue throughout the next year, positively impacting company valuations. He also pointed to companies repurchasing their own shares – for holding or internal retention – as a positive indicator, and emphasized that renewed liquidity will be a significant factor in stimulating the market.