Why do new listings decline in the Saudi market?

The director of the Zad Consulting Center, Hussein Al-Raqeeb, said that the decline in newly listed stocks in the Saudi stock market, such as “Al-Saif Gallery”, “Luberef” and “Riyadh Cables”, may be due to fear and panic among investors.

Hussein Raqib added, in an interview with Al-Arabiya, today, Thursday, that the “Luberef” company is promising and its pricing is very good, and based on its financial results for the year 2021, its profitability is 11 times, which is good for investment and has good cash distributions.

He explained that the “Saif Gallery” company announced, about an hour before the listing, a cash dividend because investors did not sell the share, but it declined despite that.

The director of the Zad Consulting Center said that this fear must be eliminated in order for the momentum to return to IPOs, because the next stage will be at stake and there may be a reluctance to subscribe.

He added that it is good for the Saudi market that there is a slowdown in listings in order for the market to regain its breath, pointing to the announcement yesterday of the approval of requests to list 5 new companies in the main and parallel markets, these are many numbers in light of the existence of a liquidity scarcity of less than two billion riyals, and therefore it is wise Postponing IPOs until the market and its liquidity improve.

Regarding the monthly bulletin of the Saudi Central Bank, Hussein Al-Raqeeb said that the bulletin showed a decline in the net profits of banks during last November, and demand deposits declined by about two billion riyals, while savings and time deposits increased by about 31 billion riyals, which greatly affects the net profits of banks. , given that it pays returns ranging between 6-7% on savings deposits.

He added that the increase in savings deposits is one of the reasons for the decline in liquidity in the Saudi market due to the high returns on it, a movement that may continue for months to come as long as interest rates continue to rise, amid an exodus of liquidity from demand deposits and from the stock market to savings deposits.