Kuwait blue chips rally, but Gulf markets muted

Logistics firm Agility surged on Tuesday after saying it might sell investments and Kuwait banks rose as traders bet a possible sale of telecoms operator Zain would boost liquidity in the sector.

But other Gulf Arab markets were flat, with volumes slumping to milestone lows. The Dubai and Kuwait benchmarks added 0.1 percent, Saudi Arabia fell by the same margin and Oman, Abu Dhabi and Bahrain all lost 0.2 percent.

Qatar's index was the biggest Gulf mover, dropping 0.9 percent, while Egypt's measure climbed 1.1 percent in lacklustre trading.

Agility surged 3.3 percent, equalling its highest close of the past 14 months after saying it may offload investments if it benefits investors. This followed a newspaper report saying Agility was in final talks to sell its stake in Iraq's Korek Telecom.

National Bank of Kuwait added 3.3 percent and Kuwait Finance House jumped 4.8 percent.

"There was an increase in volumes in the blue chips, especially in the banking sector, which has been ignored as investors focused on Zain," said Talal al-Loghani, vice-president for Gulf equity markets at Kuwait Finance and Investment Co.

"Investors tend to believe the sale of Zain will go through and if it does, there will be a lot of cash pumped back into the market and a lot of that will be directed at banks, which is the most liquid and sound sector."

Zain hit an 11-month intraday high, before ending flat as investors speculate on the telecoms firm selling some of its assets or soon becoming the subject of a takeover bid.

Most other Gulf stocks were muted, with losses on U.S markets overnight and early declines in Asian equities and oil prices sapping regional sentiment, with trading slumping in the first week of Ramadan, the Muslim holy month.

Volumes in Dubai and Saudi Arabia fell to 29-week and 46-week lows respectively, while Qatar's trading was its lowest for more than a year.

"I speak to international clients and a lot of them have neutralised their Gulf portfolios, after the region showed strong performance from mid-July to mid-August," said Richard Frost, head of research sales at Al-Futtaim HC Securities.

"They have now taken profits because they feel the rally in equity markets was sentiment driven and there's yet to be firm evidence the economy is recovering and that bank provisions from bad loans have turned around.

"Many fund managers have expected a late summer pull-back in equities and have liquidated their positions to maybe come back in at lower prices after Ramadan."

The benchmark's slight gain may be misleading because the main support, Emirates NBD, added 1.9 percent after only 1,000 of the lender's shares were traded.

"Prices are in the middle of the swing, they're neither low nor high," said Vyas Jayabhanu, head of investments, Al Dhafra Financial Broker.

"So people are afraid that if international markets perform badly, markets here will drop and the low volumes mean a big seller could impact prices quite a lot."

Saudi Arabia continued to struggle as investors fret over further fall-out from troubled Saudi family conglomerates Ahmad Hamad Algosaibi & Bros (AHAB) and Saad Group, which are embroiled in a legal battle in the United States after defaulting on debts, with some bankers warning the total cost of writedowns may hit $22 billion and affect around 120 banks.

"People are worried that other companies may follow Saad and Algosaibi and default on debts," said Youssef Kassantini, head of discretionary portfolio management at Rasmala Investment Saudi. (Reuters)

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