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Mon 18 Jul 2011 10:21 AM

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Kuwait shares slump to new seven-year low

Elsewhere, Dubai slips 0.8%, down in five of past six sessions; Saudi stocks at four-week low

Kuwait shares slump to new seven-year low
stock market
Kuwait shares slump to new seven-year low
(Getty Images)

Kuwait’s benchmark slumped to a new seven-year low after the country’s central bank governor said the economy needed corrections.

Sheikh Salem Abdul Aziz Al Sabah said the economy is witnessing an imbalance which could lead to a lot of risks, according to state news agency KUNA.

The benchmark slumped 1.6 percent to 5,973 points, its lowest close since September 2004.

Investor sentiment has been negative recently following new regulations announced by Capital Market Authority (CMA). Market participants are given until September to implement the by-laws announced in March. One of which is that investment firms will need separate licences to operate their lending and investment businesses.

“There are many issues affecting the Kuwait market. One is the CMA laws that create conflict through their application, mainly on funds and the new regulations,” says Safaa Zbib, head of research at Kuwait and Middle East Financial Investment Company.

“The government seems very pessimistic about the economy. And a lack of lending is crippling the banking sector. When companies are not in a good shape to borrow, economic activity stops.”

Kuwait Finance House dropped 5.2 percent to a year low after reporting a 43 percent fall in quarterly net profit.

The country’s biggest Islamic lender, missed analysts forecasts for the fourth consecutive quarter.

Logistics firm Agility tumbled to a fresh 12-month low, falling 3.2 percent as it extended declines following an adverse US court ruling on fraud charges on Saturday.

The firm said on Sunday it is committed to resolve the dispute with the US Department of Justice (DoJ).

Elsewhere, Saudi Arabia's shares slipped to a four-week low, taking cues from declining oil prices and global markets.

The kingdom's benchmark ended 0.6 percent lower at 6,423 points, its lowest close since June 20.

The euro, stocks, and bonds of highly indebted European countries fell on Monday as investors fled riskier assets, while safe-haven gold rose to a fresh high.

"Today's sell off is a continuation of yesterday's reaction to euro debt and events unfolding in the US," said Asim Bukhtiar, Riyad Capital head of research.

"Also, we're nearing the end of earnings season and investors are locking in gains ahead of Ramadan. Market activity is going to slow down significantly."

Eight of the ten largest stocks fell.

Saudi Arabian Mining Co (Maaden) bucked the trend, gaining 0.7 percent after saying its profits doubled in the second quarter, buoyed in part by higher gold prices.

Bellwether Saudi Basic Industries Corp (SABIC) slips 0.5 percent. The world's biggest petrochemical firm by market value, on Sunday said maintaining profitability would be a tough challenge after posting a record profit in the second quarter.

Other petrochemicals also ended lower.

Bank Aljazira dropped 6.6 percent despite its second-quarter profit nearly tripling on higher special commission and banking services income as well as decreasing expenses.

The stock had gained 5.3 percent over the previous month, but Monday's fall left it at a four-month low.

Abu Dhabi's Etisalat dragged the emirate’s index lower after second-quarter earnings missed forecasts, while analysts saw attractive valuations for banks.

The operator shed 1.4 percent after reporting a 14.9 percent drop in quarterly net profit amid a rise in operating costs.

The benchmark fell 0.9 percent to 2,707 points, halting three-session gains.

The three largest banks by market value ended lower with National Bank of Abu Dhabi declining 0.9 percent, First Gulf Bank dropping 1.4 percent and Abu Dhabi Commercial Bank falling 1.8 percent.

“In the UAE, banking is really a short term theme at best while provisions normalize,” says Ibrahim Masood, senior investment officer at Mashreq Bank.

“I just struggle to see where the extraordinary growth opportunities are but that’s the operating side. The good thing is that in many cases not even 1-2 percent type of growth is factored in on the valuation side, so there is at least a story for the near term.”

Property stocks were also down, with Aldar Properties and Sorouh Real Estate down 2.3 percent each.

Dubai’s benchmark slipped 0.8 percent to 1,533 points, down in five of past six sessions.

Losers outnumbered gainers 17 to one.

Elsewhere, Qatar’s benchmark dropped 0.5 percent to end at 8,441 points.

“You will find locals will shift to lower volume and less liquid names for this season,” says a Doha-based trader on condition of anonymity.