QFIs could change TASI trends this Ramadan: Jadwa

While the Tadawul All Share Index (TASI) traditionally sees a drop in performance during Ramadan, factors like the entry of qualified foreign investors (QFIs) and upcoming second quarter results could distort trading trends this year, Jadwa Investment said Tuesday in its report on the "Seasonality in the Stock Market."

Historically, the TASI sees negative performance in the first week of Ramadan as some investors sell shares to raise money in order to cover higher spending during the month, while others realize gains in anticipation of a fall in share prices.

“On average, the TASI’s weekly performance was down by 1.7 percent in the first week, 0.4 percent in the second week, and 0.1 percent in the third week of Ramadan,” Jadwa said.

As the month progresses, this trend will continue with investors paying less attention to the market, it added.  

Investors may expect a revival in the final week— on average, a weekly rise of 1.4 percent— even though the holy month’s last trading week is typically shorter than the others.

However, since TASI just started accepting QFIs, this unprecedented step will add a degree of unpredictability during the period.

Towards the end of the month, second quarter results for listed companies will also start being published.

Lastly, the inability of Greece to reach an agreement with its creditors could weigh on international markets and subsequently also on the local investor sentiment.

While most sectors see subdued trading activity during the period, hotels, agriculture, and food segments have traditionally benefited. Average performance in the agriculture and food sector in Ramadan is 2.6 percent higher than just before the start of the holy month.

The hotels sector typically benefits due to Umrah and holy pilgrimages.

In contrast, multi investment, insurance, building, and construction are the three worst performing sectors.

Builders also underperform as far less construction takes place during the shorter working days and hot summer season, the report added.