Saudi Arabia's Tadawul All-Share Index suffered dramatic declines this week, with traders selling out of shares in a seeming panic.
But now institutional investors are starting to look at opportunities in consumer-related companies.
Retail investors drove the sell-off, but institutional investors believe corporate earnings are unlikely to be materially affected by events in other parts of the Mena region. This should offer compelling entry points on consumer names such as Savola and Almarai, said Tariq al Alaiwat, an analyst at NCB Capital.
Institutional investors have been buying selected names given the low prices, Mr al Alaiwat added.
The Tadawul All-Share Index lost more than 20 per cent of its value in the past week, down to its lowest since July 2009. It is trading below 14 times earnings, compared with a historic average price to earnings ratio of 20.
Savola dropped 9 per cent on Wednesday, extending losses made earlier in the week and adding to cheap valuations of the company.
Retail has been identified as one of the best value sectors on the stock market, and is trading at about 12.6 times earnings.
"We believe long-term investors should take advantage of the current market weakness in establishing inexpensive entry points," Mr al Alaiwat said.
Petrochemicals shares are trading at 14 times earnings, telecommunications at 11.8 times and dividend yields on many stocks are now also quite compelling.
Even large government agencies, which have not been active in the market over the past six months, bought at least 589 million Saudi riyals in securities last month, data from NCB Capital show.
Analysts say the positive valuations of these companies should be considered carefully, particularly concerning consumer-related companies in the context of soaring food prices that cut into margins. The FAO Food Price Index, which measures the wholesale price of a basket of basic foods, averaged 231 points last month - its highest level since records began in 1990.
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What are NFTs?
Are non-fungible tokens a currency, asset, or a licensing instrument? Arnab Das, global market strategist EMEA at Invesco, says they are mix of all of three.
You can buy, hold and use NFTs just like US dollars and Bitcoins. “They can appreciate in value and even produce cash flows.”
However, while money is fungible, NFTs are not. “One Bitcoin, dollar, euro or dirham is largely indistinguishable from the next. Nothing ties a dollar bill to a particular owner, for example. Nor does it tie you to to any goods, services or assets you bought with that currency. In contrast, NFTs confer specific ownership,” Mr Das says.
This makes NFTs closer to a piece of intellectual property such as a work of art or licence, as you can claim royalties or profit by exchanging it at a higher value later, Mr Das says. “They could provide a sustainable income stream.”
This income will depend on future demand and use, which makes NFTs difficult to value. “However, there is a credible use case for many forms of intellectual property, notably art, songs, videos,” Mr Das says.
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Specs
Engine: 51.5kW electric motor
Range: 400km
Power: 134bhp
Torque: 175Nm
Price: From Dh98,800
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Real estate tokenisation project
Dubai launched the pilot phase of its real estate tokenisation project last month.
The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.
Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.
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