Trading volumes on the Saudi bourse hit a record of $17.4 billion in 2000, a year when the correlation between oil prices and market performance weakened, Bakheet Financial Advisors (BFA) reported Wednesday, December 27.
The Riyadh-based investment specialists said the NCFEI index rose 11.3 percent over the year, but "this increase was less than expected given the usual high correlation between the Saudi stock market and oil prices."
The average price of oil, the mainstay of the economy of energy-rich Saudi Arabia, shot up 57 percent over the past 12 months, it noted.
In August, the NCFEI climbed to 2,392.8 points, another record in the 15-year history of the index, but it took a U-turn in the final quarter under the negative influence of the Israeli-Palestinian conflict.
BFA said 2001 performance would depend on "the speed of implementing previously announced economic and financial reforms, the start of the privatization process" and diversification from oil as the key driving force of the Saudi economy.
The NCFEI is the most capitalized in the Arab world, at more than $60 billion, but it operates only on an interbank market system.
Finance Minister Ibrahim al-Assaf called last week for the rapid creation of a formal stock market to improve transparency and boost private sector investment.
"The project has been delayed a lot and will be relaunched" after Muslim holidays which run into next week, he said.
But a formal bourse "will not necessarily lead to a halt to Saudi capital flowing abroad, as the kingdom has long been an exporter of capital funds because of the limitations of its economy to absorb them and its openness to the world."
Financial analysts in the Gulf state estimate that a staggering $600 billion in Saudi funds are invested abroad.
On the back of high oil prices in 2000, Saudi Arabia achieved economic growth of 15.5 percent and a budget surplus for the first time in 18 years, amounting to $12 billion. King Fahd has announced a balanced budget for 2001.
But the government's domestic debt tops $160 billion, almost as high as the gross domestic product for this year, Assaf revealed.— (AFP)
© Agence France Presse 2000
© 2000 Mena Report (www.menareport.com)
