Worries about global markets, euro zone debt crisis and geopolitical issues in the Gulf region kept investors subdued last year and prevented the Saudi stock market from making sharp gains, according to Kingdom-based analysts.
Their remarks came as fresh data, issued Monday, revealed that the Tadawul All-Share Index (TASI) dropped slightly last year from the levels of 2010.
According to Tadawul's Annual Statistical Report, the index closed 203.02 points or 3.07 percent down at 6,417.73 points at the end of 2011 compared to 6,620.75 points in 2010.
The analysts, highlighting the Capital Market Authority’s (CMA) keenness to develop the Kingdom’s equity markets, said its plan to allow direct foreign ownership to investors is expected to make a limited expansion of the bourse this year.
The highest closing level for the index was 6,788.42 points as on Jan. 16, according to the report.
Ragheb Othmani, senior officer, asset management at the Riyadh-based Bakheet Investment Group, said Tadawul’s performance in 2011 was relatively good as compared to other GCC markets with the exception of Qatar.
He said the Saudi stock market did not rise sharply in 2011 because of some worries over international markets and the economic situation around the world.
"The Gulf region is in tension and geopolitical issues have shaken the confidence of some investors," Othmani added, commenting on the market statistics.
Some of the Tadawul-listed companies have branches in those affected countries in the region and this is having some negative impact on the performance of these companies, he pointed out.
The total market capitalization in 2011 dropped by 4.12 percent to SR1.27 trillion ($338.89 billion).
The total value of shares traded reached SR1.10 trillion ($293.02 billion) compared to SR759.18 billion ($202.45 billion) for the previous year, increasing by 44.74 percent.
The Tadawul report said total number of transactions executed during the year 2011 reached 25.55 million compared to 19.54 million trades for the previous year, increasing by 30.77 percent.
The total number of shares traded up by 45.61 percent to reach 48.54 billion compared to 33.33 billion shares traded during the previous year.
The performance of Tadawul during 2011 is somewhat paradoxical in view of the record-breaking performance of the economy as a whole.
Jarmo T. Kotilaine, chief economist at the National Commercial Bank, pointed out that the Saudi bourse rallied from its lows and the final decline for the year was relatively modest.
He said the numbers on the volume of trading are even more encouraging.
"In spite of considerable volatility in the course of the year, we ended up with a marked improvement on last year. This is obviously positive news not only for the exchange but also the broader non-banking financial sector," he told Arab News.
Overall, he said the exchange is beginning to look fairly well positioned for the much anticipated relaxation in foreign ownership rules.
"In sectoral terms, the strong performance of petrochemicals is not surprising in view of its weight and the robust oil price. The insurance sector continues to be characterized by somewhat unique dynamics, partly in reflection of its fragmentation and the potential for consolidation this creates," Kotilaine said.
The Tadawul report said that daily average number of transactions in 2011 reached 103.01 thousand trades compared to 78.46 thousand trades during the previous year, increasing by 31.29 percent.
The daily average value of traded shares jumped by 45.32 percent to SR4.43 billion in 2011 compared to SR3.05 billion in 2010.
The daily average number of traded shares reached 195.71 million compared to 133.87 million shares during the previous year, increasing by 46.19 percent, the Tadawul report said.