RIYADH: Saudi Arabia’s Tadawul All Share Index is expected to consolidate and remain range-bound for the next three to six months despite a sharp correction in the equity markets and valuations moving below the average levels, according to a report by Al Rajhi Capital. In its report titled ‘Saudi Equity Market Report’ Al Rajhi Capital noted that selected banks and petrochemical companies will rally in the second half of 2023. “As clarity emerges over Fed’s interest rate trajectory and its impact on the global economy, we believe modest rally to happen in the second half of 2023 mainly led by banks and petchem,” said Al Rajhi Capital in the report. The report further noted that bank stocks in aggregate are expected to offer a 10 percent upside from current price levels, a rally which will be primarily led by large banks. According to the report, the demand outlook for petrochemicals will most probably be weak due to the global economic slowdown. “Average polymer prices are down by around 20 percent to 30 percent from their second-quarter 2022 average levels, due to the elevated demand concerns and oversupplied markets. However, we believe polymer prices have reached the bottom,” said Al Rajhi Capital in the report. The report further pointed out that feedstock prices are expected to witness a limited price correction aided by firm oil prices in 2023. According to Al Rajhi Capital, oil demand is expected to grow in 2023, driven by relaxation in China’s COVID-19 policies. The report added that crude prices will be firm next year, due to factors like healthy demand growth, lower inventory levels, and the decision of the Organization of Petroleum Exporting Countries and its allies, known as OPEC+, to cut output by 2 million barrels per day, which equals to about 2 percent of world demand, from November 2022 until the end of 2023. “As per the current trading forward contracts, crude prices are expected to average at $79 per barrel for 2023. Overall, healthy oil prices will continue to support government revenues and reforms,” the report added. Al Rajhi Capital went on to say that Saudi Arabia is likely to produce 10 million barrels of oil per day in 2023. According to the report, firm oil prices will fetch a revenue of SR754 billion ($201 billion) in 2023 to the Saudi government, thus helping to witness the second financial surplus since 2013.