Broad rally across Gulf stock markets

Saudi surge on Saturday raises hopes that impact of cedit crunch is beginning to diminish.
Broad rally across Gulf stock markets
By Firouz Sedarat
Sun 05 Apr 2009 08:24 PM

All seven Gulf markets advanced on Sunday, spurred by Saudi Arabia's surge the previous day as institutional buying swelled trading volumes.Brokers said investors are increasingly optimistic and believe the likely effects of the credit crunch and global recession on the Gulf economies may have been exaggerated.

"A lot of clients are thinking they may have missed the bottom of the market and so we're seeing rising institutional flow coming in," said Matthew Wakeman, EFG-Hermes managing director for cash and equity linked trading.

This translated into significant gains across the region, with Dubai's index posting its biggest one-day rise for six weeks, while Kuwait enjoyed its best single-session performance since October 2008 as volumes hit a near two-year high.

Regional markets have been among the hardest hit during the global downturn, with the Dubai bourse down 72 percent since the end of 2007, while the Saudi market has lost 56 percent over the same period and the five other Gulf indices have each fallen by more than 40 percent.

"The market will remain choppy - people will be taking a short term view and will very quickly turn to profit-taking," said Shahid Hameed, Global Investment House head of asset management for the Gulf Arab region.

"Typically, in bear markets people jump in when the market rallies because they don't want to miss out on a potential bull run and so trading tends to be very volatile."

Other brokers were similarly cautious and many expect Gulf markets to trade flat on Monday and mirror Saudi Arabia's performance so far this week, which saw the Tadawul jump 5.3 percent on Saturday, before adding a further 0.7 percent on Sunday.

This week's uptrend follows a broadly positive March, but traders voiced doubts whether this can be sustained, with first quarter results set to decide the markets' medium-term fate.

"If results are worse than expected then we could return to last week's uncertainty and low volumes," said Samer al-Jaouni, general manager of Middle East Financial Brokerage Co.

"Part of the current rise is speculation and part of it is because prices have fallen so low that institutions are building new positions after selling huge parts of their portfolios."

World stock markets rallied on Friday after the G20 agreed a new $1.1 trillion rescue package for the globe's ailing economies.

"The rescue plan has given investors hope that the worst might be over, but this is the strategy and next comes the implementation," said Youssef Kassantini, head of private banking at Rasmala Investment Co.

"Will the money be deployed quickly and will it be enough? Will it reach the right entities? These are the questions the market will ask over the next few months," he added.

In Dubai the index surged to a six-week high, rising 2.6 percent to 1,625 points.

Emaar Properties rose 6.8 percent - its highest close since Jan 7.

In Abu Dhabi the market closed 1.8 percent higher at 2,542 points - National Bank of Abu Dhabi adding the most points to the UAE capital's index, climbing 7.4 percent. Rival First Gulf Bank rose 7.6 percent.

The benchmark in Saudi Arabia gained 0.7 percent to 5,001 points, its highest close since Jan. 13, buoyed by Samba Financial, which added 6.1 percent.

In Kuwait the index put on 3.3 percent to 7,134 points, extending gains for a fourth day as volumes hit a near two-year high of 714 million shares.

Mobile Telecommunications Co (Zain) advanced 6.8 percent and National Bank of Kuwait added 6 percent.

Elsewhere, the Qatar market climbed 5.3 percent to 5,160 points - its largest one-day advance for eight sessions.

All 20 stocks on the index advanced, with Qatar National Bank and Industries Qatar climbing 7.7 and 5.9 percent respectively.

In Oman the index added 2.7 percent to 4,716 points - its largest one-day gain since Jan 27 as investors bet on some companies reporting strong first quarter results.

Bank Muscat led the benchmark higher, rising 3.9 percent, and Oman International Bank surged 4.8 percent.

The Bahrain index advanced for a fourth straight session to close up 0.13 percent at 1,608 points.

In Egypt, meanwhile, stock indexes surged on Sunday, led by gains on Orascom Telecom and Orascom Construction Industries  as investors bet the stocks had fallen too low given earnings expectations.

The benchmark EGX 30 index rose to its highest in almost three months on hopes the market had hit a bottom.

"People are confident the bottom has been made and now we're going to start to trend upward," said Hashem Ghoneim of Pyramids Capital.

"Orascom Construction Industries (OCI) and Orascom Telecom (OT) are undervalued... but now they're picking up again very nicely with the international market, and all the small caps are flying," he added.

Shares in OT gained 6.32 percent to close at 28.62 pounds ($5.09) per share, while OCI gained 11.34 percent to 155.01 pounds.

Ezz Steel Rebars also surged, gaining 10.2 percent to 8.10 pounds, while investment bank EFG-Hermes rose 11.99 percent to 18.50 pounds.

Overall, the EGX 30 rose 6.01 percent to 4,625.81 points, while the rival Hermes index gained 5.42 percent to 436.19 points.

The broader EGX 70 index put on 5.31 percent to 577.07 points. (Reuters)

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