May 03--JEDDAH -- Jadwa Investment says it expects the Kingdom's inflation rate to remain at the current level before picking up in the second half of 2013.

"Inflation rate in March remained flat at 3.9 percent for the third consecutive month, though Jadwa Investment's measure of core inflation in the Kingdom eased," it said in a report.

While food inflation eased slightly in March, it remained the main contributor to the headline inflation. Rental inflation, however, reached its highest level since June, Jadwa Investment says.

Inflation in the Kingdom remains on the high end compared with its trading partners, the report pointed out.

It also said the Tadawul All-Share Index (TASI) maintained a flat trend in April as concerns about the global economy put downward pressure on commodity prices including oil.

Some disappointing first quarter results also played a role in such flat trend, leading TASI to underperform most regional markets in April, said the report.

Nine of the 15 sectors rose during April with hotel and tourism sector posting double digit gain, mostly owing to speculative trading activities. Sectors with the highest exposure to the regional and global uncertainty were among the laggards.

The report indicated that TASI notably underperformed most regional markets last month.

Jadwa Investment said that net income of listed companies totaled SR 23 billion in the first quarter.

This was 10.7 percent lower than in the first quarter of last year, but 16 percent above the previous quarter. Real estate, transport and hotel recorded the strongest quarter-on-quarter growth.

The following are some of the highlights:

Real economy: Economic data for March stayed healthy. Indicators of domestic demand picked up, with both consumption indicators that we track hitting an all-time high. Cement sales also jumped to their highest level in March.

Bank lending: Annual growth of bank lending to the private sector remained on a downward trend owing to a large base effect while the monthly growth improved in March. Manufacturing and commerce have been the largest recipients of new lending so far this year.

The manufacturing sector was the largest recipient of new funds, accounting for 22 percent of net credit issued by bank in the first quarter.

Bank liquidity indicators: Bank deposits rose owing to a significant increase in demand deposits while saving deposits contracted. Bank excess deposits at the Saudi Arabian Monetary Agency remained very high, giving scope for further lending growth. At the same time, the loan-to-deposit ratio slight eased in March.

Bank profits: Higher lending and deposits and lower funding cost have supported bank profits, which maintained monthly profits at or above SR 3 billion for three consecutive months.

For the first quarter, almost all domestic banks registered a positive annual profit growth.

Banks profits in March registered a new high compared with the same period of the last five years.

Ten of the 12 domestic banks registered higher profits in the first quarter compared with the same period last year.

Balance of payments: Full balance of payments data for 2012 show that the current account surplus was $ 172 billion (23.7 percent of GDP), $ 6.3 billion lower than the preliminary estimate in the budget and up from $ 158.5 billion in 2011. Higher oil revenues were the cause of the rise.

Elevated oil export revenues maintained a robust current account balance over the last few years.

The deficit on the services account narrowed. The largest moves were for communication and financial services.

Income on foreign portfolio investments improved last year, but inflows of foreign direct investment fell to their lowest level since 2005. Political unrest elsewhere in the region probably contributed to the fall.

Trade: Both imports and non-oil exports fell in February. Letters of credit opened for new imports jumped to a record high in March, reflecting expectations of strong domestic consumption demand.

Nonoil exports fell for the third consecutive month in February. The fall is mostly due to lower petrochemicals exports revenues which shrank by 25 percent year-on-year.

Imports also fell in February to $ 12 billion, the lowest level since August last year.

Letters of credit opened for imports jumped in March to an all-time high. This is likely to translate into higher imports in the coming months.

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