Fixed income dominates TASI ahead of earnings

The article discusses the outlook for the Saudi Stock Market (TASI) as the third-quarter earnings season begins, focusing on the impact of rising returns on government sukuk and financing costs on market valuations and company profits. The stocks declined by about 2% after the price-to-earnings ratio dropped to 13.9 times, while sukuk yields and the Saudi interbank rate (SIBOR) increased, putting additional pressure on market performance. Investors are paying close attention to Q3 results, particularly their ability to protect profit margins or improve future outlooks. Stronger-than-expected earnings could support the market and offset the effects of higher yields, while results in line with or weaker than expectations may prolong pressure and lead to lower valuations—especially if accompanied by higher financing costs and declining future profits. The markets now need clear signals of earnings growth strong enough to offset rising capital costs, in order to avoid continued declines or only slight improvements.

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