With tension in Egypt easing, NCB Capital expects Gulf markets to rally in next few days

In the latest in its series of award-winning equity research reports, NCB Capital, Saudi Arabia’s largest investment bank, expects TASI and other Gulf markets to rally over the next few days as tensions in the region ease without the situation deteriorating.

“The TASI is roughly flat year-to-date and down about 1% since the start of the demonstrations in Egypt. Although we have highlighted in earlier reports that we do not expect a material impact on companies in KSA from events in Egypt, yet increased risk aversion has caused weakness in the market,” said Eiji Aono, Head of Equity Research at NCB Capital “Now, with President Mubarak’s departure, we believe the general relief in tensions will support a short-term rally in the TASI as well as the other Gulf markets over the next few days.” 

NCB Capital expects earnings for companies in the Saudi market to increase by at least 25% in 2011. With the TASI trading on about 17x earnings versus a historical average of 20x, the market looks far from expensive. NCB Capital continues to believe the combination of an inexpensive valuation and steady earnings growth should allow the TASI to rise to the 7500-8000 range for the year. 

While the immediate impact of President Mubarak stepping down is positive for the markets, NCB Capital believes that there are potentially further areas of concern in the region. Egypt itself will likely see volatility once its stock market opens on Wednesday and the country has a long way to go in revising its Constitution, organizing political parties, and holding free and fair elections. In addition, other political uncertainties in the region could increase investor concerns. 

NCB Capital was voted best research house in three categories in Euromoney’s annual Middle East research survey for 2010. The Bank achieved a total of 10 ranked positions in the 2010 survey, the third highest amongst all research firms in the region. On the basis of top ranked positions, the firm achieved the second highest total in the region. 

The bank provides analysis on the agriculture and food, cement, construction, industrials, petrochemical, consumer goods/retail and utilities sectors; the only domestically-owned investment bank to offer such a range.