Saudi shares rise on royal handouts, Qatar outperforms

DUBAI, Jan 7 (Reuters): Saudi Arabia's stock market rose on Sunday after King Salman announced a package of handouts for Saudi citizens to compensate for rising living costs, while Qatar was the strongest market in the region ahead of dividend announcements.

The Saudi index gained 0.6 per cent. Shares in most retail sector firms, which could benefit from the package's boost to consumer spending power, rose with major retailer Jarir up 2.6 per cent to its highest since early October.

The information minister was quoted by the Al Sharq Al Awsat newspaper as saying the cost of this year's handouts, which include bonuses for state employees and the government paying value-added tax (VAT) on some items such as purchases of first homes, would total about 50 billion riyals ($13.3 bln).

That is about 1.9 per cent of this year's projected gross domestic product. An additional 30 billion riyals would be spent this year on a previously announced aid programme for low-and middle-income Saudis.

The steps are unlikely to trigger a consumer boom. Private economists have estimated the government will raise about 40 billion riyals in 2018 by introducing VAT, while gasoline price hikes that took effect this month are expected to cost consumers tens of billions of riyals.

But the handouts are a sign that Saudi authorities are keen to limit damage to domestic demand from this year's austerity measures, and that rising oil prices are giving them the means to do so.

Qatar's index rose 1.4 per cent on the back of stocks including Barwa Real Estate, which gained 2.9 per cent, and major Islamic bank Masraf Al Rayan, up 4.3 per cent.