Is the Saudi Stock Market Heading Back Toward the 12,000-Point Level? How Are Investors Thinking?

Mounting pressures from global markets—particularly from the United States—alongside renewed geopolitical tensions, have raised doubts about the Saudi stock market’s ability to retarget the technically and psychologically significant 12,000-point level.

Among the factors currently weighing on the Saudi market’s performance are the escalating U.S. tariffs, which are fueling uncertainty regarding growth expectations for the world's largest economy.

The impact of this trade war has already spilled over into U.S. markets, triggering a wave of declines and corrections. Another key factor influencing the Saudi market’s direction is oil price stability, which remains a major driver. However, oil prices face uncertainty due to rising geopolitical tensions in the Middle East.

It is worth noting that despite Saudi Arabia’s ongoing efforts to diversify its economy away from oil, crude prices and their forecasts continue to exert significant influence. Global investment bank Goldman Sachs recently cut its Brent crude price forecast by $5 to $71 per barrel by year-end, citing concerns over slowing U.S. economic growth and increased production by OPEC.

From a technical perspective, the Saudi market's trend remains unclear in the medium to long term, pending the full release of corporate earnings for Q4 2024 and outlooks as well as disclosures for Q1 2025.

During the current earnings season for Q4 2024, the Saudi market has remained relatively within expected trading ranges despite recent declines. The "TASI" index is fluctuating between 11,800 and 12,400 points.

At present, we are witnessing a portfolio rebalancing phase, with a strong focus on dividend distributions and companies' profitability ratios, all amid low liquidity levels—the lowest since the start of the year.

However, the Saudi market may find support from signs of improvement in China’s economy, despite the lingering effects of Trump-era tariffs. Some investors might even turn to buying regional stocks as a hedge against those tariffs. "Some companies in the region, particularly in Saudi Arabia, are offering attractive dividend yields."

Moreover, the Middle East’s relative insulation from the direct impact of U.S. tariffs could present strong opportunities to acquire shares of companies that are now trading at low price levels.

It is also important to note that most Saudi petrochemical companies rely heavily on Chinese demand. Expectations suggest we may soon see a rebound in demand for their products from Beijing, with negative factors such as falling prices, shrinking demand, and rising interest rates potentially easing.

At the close of the latest trading week, the Saudi stock market’s main index rose 0.4% to 11,760 points, recovering losses from the previous two sessions and breaking a three-week losing streak. This was largely driven by gains in energy stocks, led by Aramco, even as banking sector shares declined amid traders digesting U.S. Federal Reserve Chair’s comments on the interest rate outlook for 2025.