TASI Record Profits Fail to Attract Investors

The article explains that the rise in Saudi companies' profits in the second quarter of 2026 by 37% to 170.5 billion riyals did not lead the Tadawul Index to surge strongly, despite its P/E ratio declining to the lowest level in eight years. This is due to changing market conditions regarding the cost of money, as the Saudi Interbank Offered Rate (SAIBOR) increased to over 6% before retreating, raising the cost of financing and decreasing the attractiveness of equities compared to safe-yield instruments, whose returns have increased. Additionally, the rise in yields on debt instruments prompted investors to demand higher returns from stocks to compensate for the risk, exerting pressure on their valuations. This has shifted the market into a state of equilibrium that does not fully reflect the strength of earnings, making it unsurprising that market indicators are not exceeding historical averages. Therefore, record profits alone are no longer sufficient to support a market rally, as the economic environment and investment fundamentals have changed, and alternative returns have increased. This forces investors to reevaluate the scope and real value of their assets.

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