Dubai leads gains as ME markets rally

Declines out of Asia not as severe as expected following US market falling.
Dubai leads gains as ME markets rally
By Matt Smith
Mon 25 Jan 2010 09:25 PM

Middle East markets rebounded on Monday after a steady opening in Asia soothed nerves, with most Gulf indexes clawing back after a sell off in the previous day inspired by Obama's bank plan.

Dubai was the standout performer, climbing 2.8 percent in its biggest gain for three weeks, while the six other Gulf Arab benchmarks added less than a percent. Egypt's bourse was closed for a holiday.

Ali Khan, managing director and head of brokerage, Arqaam Capital, said: "The severity of yesterday's correction was a mystery and so the market is bouncing back from that."

He added: "The declines out of Asia today are not as severe as we would have expected given the fall on US markets on Friday and that's brought a comfort factor to our region."

On Thursday, US President Barack Obama announced plans to curb US banks' proprietary trading, sending stock markets across the globe lower and adding to rising jitters over the health of the world economy.

Shailendra Singh, investment manager, Al Shurooq Securities, Muscat, said: "Obama's plan is likely to impact the major U.S. banks and the whole global financial sector, while the Gulf could follow suit and introduce similar rules."

He added: "In the long term, Obama's move will be positive for investors - banks would focus on their core business and there would be more stability in the market."

In the short-term, most analysts remain cautious, forecasting more range-bound trading on regional bourses, while Dubai Holding's spat with Standard & Poors will do little to boost confidence in UAE stocks.

Robert McKinnon, ASAS Capital chief investment officer: "It's hard to see what positive catalysts might be out there."

He added: "So I think markets will move sideways to down over the next three months at least. I don't see positive catalysts coming from earnings or from global markets."

DP World, part of debt-laden Dubai World, rose 3.9 percent after the ports operator issued a trading update and said it would list on the London Stock Exchange (LSE) in the second quarter of this year.

Arqaam's Khan said:"We have been calling a buy on DP World - volumes in the second half of 2009 were up versus the first half and it seems like the company has turned a corner."

He added: "DP World is a good proxy to recovering world trade and that theme is manifesting itself in rising container volumes, which are now back to almost pre-crisis levels. The London listing will substantially increase the company's profile."

In Saudi, chemical company Saudi Basic Industries Corp (SABIC) rose 0.6 percent, lifting the region's index.

Speaking to Reuters, a Riyadh based analyst who asked not to be identified, said: "Oil has made quite a significant move downwards without much support - if it gets closer to $70, there will be an effect on the (Saudi) market because everything always comes back to petrochemicals."

He added: "A lot of international investors play SABIC as a proxy for a global economic recovery and if that isn't happening, then people will sell the stock."

Oil is down 0.1 percent at $74.46 a barrel at 1326 GMT and has fallen more than 10 percent in the past two weeks as worries over the global economy weigh. (Reuters)

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