Emaar stars as Dubai index closes at 20-week high

Emaar Properties lifted the Dubai index to a 20-week closing high on Wednesday as most Gulf markets advanced on surging global sentiment and oil's climb to a new six-month peak.

Further gains are expected on Thursday, providing U.S. stocks hold firm overnight, traders said.

Emaar rose 5.5 percent, putting it up by almost a fifth this week as retail traders bet on a faster economic recovery.

"As a market proxy, if the region performs well then Emaar is expected to follow suit," said Matthew Wakeman, EFG-Hermes managing director for cash and equity-linked trading.

"It's very speculative, but Emaar is a stock that has underperformed over the past year and so investors believe its downside is slight, while there has been a lot of news flow that Dubai is over the worst and so if there's an economic recovery, Emaar should outperform other sectors."

This optimism contrasted with widespread fears the previous day that the global economy was again faltering. But a surprise jump in US consumer confidence sent US stocks soaring late Tuesday and drove Asian stocks higher on Wednesday, priming Gulf equities for a rebound after most fell the previous session.

Oil's rise was another critical factor, hitting a six-month high above $63 a barrel after Saudi Arabia, the world's largest crude exporter, said the global economy was strong enough to support oil at $75 to $80.

"Rising oil prices have boosted sentiment across the Gulf - it's a macro play and about how rising government revenues will trickle down to the corporates," said Haissam Arabi, chief executive and fund manager at Gulfmena Alternative Investments.

The Abu Dhabi and Qatar benchmarks added 1.3 and 1.8 percent respectively, but investors on other exchanges were more cautious, with a strong performance in the market leaders of Oman and Saudi Arabia masking broad losses in other blue chips.

Saudi Basic Industries Corp (SABIC) rose 1.6 percent after Morgan Stanley started coverage on the stock with an 'overweight' rating. The U.S. bank also set a price target of 88 riyals for the share, which ended on 64.75 riyals.

Four of the 10 largest Saudi stocks declined with two rising and four unchanged. The Saudi index has fallen 5.1 percent since closing at a six-month high on Saturday.

"In a normal situation when an economy is good, one would expect some profit-taking and consolidation after such a big move," said Azam Braikan, Saudi-Swiss Securities head of brokerage in Riyadh.

"So with the credit crunch and the global economic crisis, it's fair to say Saudi stocks are overbought and that prices don't reflect earnings."

In Kuwait, Mobile Telecommunications Co (ZAIN) climbed 5.6 percent to lift the Kuwait index to its highest finish of 2009.

"For the past couple of weeks, telecoms have been stable and so are now playing catch-up with the rest of the market," said Abdul-Muhsen al-Bahar, head of local and Gulf investments at Noor Financial Investment Co. "Buying is increasing and it's down to stability in parliament and stronger oil prices."