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Tue 25 Jan 2011 02:32 PM

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Oil drop weighs on Saudi petchems; banks up

Traders book profits in local petrochemical stocks, but the kingdom's index TASI ends flat

Oil drop weighs on Saudi petchems; banks up

Sliding oil prices spurred Saudi day traders to book

profits in local petrochemical stocks, but the kingdom's index

TASI ended flat as some banks rise.

Saudi Basic Industries Corp (SABIC) and Rabigh

Refining and Petrochemical Co each fell 0.7 percent,

while Saudi Kayan lost 0.8 percent.

"The market is trading sideways and investors are in a

cautious mood today," said a Saudi-based fund manager who asked

not to be identified. "Weakness in oil prices gave day traders

an excuse to book profits in petrochemicals.

"Petrochemical stocks are reasonably priced and will move

along with oil prices in the near term."

Banque Saudi Fransi rose 1 percent and rival

lender SABB added 2.4 percent.

"The banking sector has brought positivity on expectations

that the era of provisioning is over and lending to the private

sector will improve this year," added the fund manager.

The index edged up 0.02 percent to 6,724 points.

Oil was down 1.4 percent at $86.61 per barrel at 1239

GMT after an overnight rate increase in India and a surprise

contraction in the UK economy fanned concerns about the pace of

the global recovery.

Aldar Properties plunged to a new

five-year low and slumping real estate prices are likely to

further dampen sentiment for the indebted developer.

Aldar, which has made a loss for four straight quarters,

dropped 4.2 percent to AED1.82, its lowest finish since at

least April 2005. The state-linked firm's shares have plunged

since it unveiled a restructuring plan dilutive to shareholders.

Aldar's management has indicated it will repay about AED12bn ($3.27bn) in debt by 2013, says Jad Abbas,

EFG-Hermes real estate analyst.

A Reuters poll last week forecast oversupply would cause Abu

Dhabi and Dubai house prices to make further double-digit

declines, with the latter's prices already about 60 percent

below a 2008 peak.

"I don't think we will see a recovery in the UAE real estate

sector in 2011 - there is still more supply coming on stream,

putting pressure on prices and rents, but we need to

differentiate between Dubai and Abu Dhabi," says EFG's Abbas.

"Dubai is further down the cycle and I think Abu Dhabi has

further to go."

Abu Dhabi's index ADI dropped 0.3 percent to 2,667 points,

its lowest close since October 5.

Dubai's benchmark DFM fell 0.4 percent to 1,624 points

as property-related stocks slide.

Emaar Properties dropped 1.5 percent, contractor

Drake & Scull lost 1.8 percent and builder Arabtec

fell 2.2 percent.

Kuwait's index KWSE ended higher as mid-cap

banks rallied, but valuations may have run ahead of fundamentals.

Ahli United Bank rose 4.6 percent and Burgan Bank

added 3.6 percent. These gains helped the bank index

limb 0.5 percent to a new 27-month high.

Banks stocks have surged since Kuwait last year unveiled a

$104bn development plan - to be part-financed by banks -

that will improve the country's infrastructure, but few details

have since emerged.

"Given the sheer size of the plan, I would wait to see

concrete signs that it has passed through all the necessary

hurdles first," says Ibrahim Masood, senior investment officer

at Mashreq Bank.

"Fundamentals need to catch up with where Kuwait stocks are

trading - valuations have run ahead of themselves, especially

when you look at some of the risks such as the structural issues

Kuwait faces.

"Kuwait's market doesn't look very exciting from a

short-term perspective."

Zain fell 2.7 percent, a day after banking

sources said the telecoms operator is offering banks four

levels of participation in syndication for a $1.2bn loan.

Kuwait's main index climbed 0.2 percent to 6,973 points.