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Wed 9 Feb 2011 10:37 AM

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Saudi edges higher, but volumes drop

Dubai's index DFM slips 0.2% to 1,603 points; Kuwait's index KWSE edges higher

Saudi edges higher, but volumes drop
STOCK WATCH: Qatars index QSI ended lower for a second session in three as volumes slumped to a two-week low (AFP/Getty Images)

Volumes dropped as Saudi Arabia's index TASI ended

nearly flat, with little reason for investors to open positions

on the final day's trading of the week.

Saudi Fertilizers Co (Safco) rose 1.5 percent

and Savola added 1.7 percent, but Kingdom Holding

dropped 2.4 percent.

The index edged up 0.08 percent to 6,612 points, its sixth

gain in seven sessions, although volumes fell by a fifth from

the day before.

The benchmark faces resistance at 6,700 points, Shuaa

Capital wrote in a research note.

"The TASI's latest performance brings little change to the

picture as we remain cautious and advise locking in some of the

gains by selling near the resistance," Shuaa adds.

Qatar's index QSI ended lower for a second session in three as volumes slumped to a two-week low, with little movement expected until companies pay dividends.

Qatar National Bank dropped 1.8 percent and Islamic lender Masraf Al Rayan fell 2 percent.

Islamic bank stocks were up this week after the central bank instructed conventional lenders to dispose of their Islamic banking assets by the end of 2011.

The central bank is expected to issue further details on the ruling by the end of this week, said Hani Girgis, assistant chief dealer at Dlala brokerage.

"Hopefully, this will make everything clearer - there's a lot of talk about what the central bank might do," he says.

The index slipped 0.3 percent to 8,914 points. Volumes dropped by about a third from a day earlier.

"The market will move between 8,800 and 9,000 points until dividends season is over," added Girgis.

Dubai's index DFM slipped 0.2 percent to 1,603 points.

Builder Arabtec and Air Arabia dropped 1.7 and 1.6 percent respectively.

Abu Dhabi's Aldar Properties slid after the indebted developer reported a record quarterly loss, as retail investors dumped its shares.

Aldar dropped 3.2 percent to AED1.82 after it made a fourth-quarter loss of AED11.14bn ($3bn), having taken writedowns of AED11.3bn in 2010, of which AED10.8bn were booked in the final quarter. Aldar has made losses for five straight quarters.

"Aldar's impairments were slightly higher than expected, but this was more or less priced in, so it was a surprise to see pre-market bids at limit down," says Ahmed Badr, Credit Suisse research analyst, speaking before Wednesday's trading session began.

Aldar announced the writedowns in January as part of a rescue package that includes selling various assets totaling $4.5bn to Abu Dhabi's government, while state investment vehicle Mubadala will also buy a AED2.8bn Aldar convertible bond.

"We have a negative outlook on Aldar," says Badr.

"The money it will get from the asset sales and convertible bond will be used to repay debt and for development capital expenditure. We think the recurring income from investment property won't be enough to derive equity value."

Credit Suisse has an underperform rating on Aldar and a fair value price of AED1.59.

"We don't see an imminent turnaround in Aldar unless the property market recovers and that seems unlikely," Badr.

"The capital structure of Aldar was significantly over-leveraged and it was then hit by the property downturn.

"Aldar was revaluing its investment assets upwards for the previous four years, so it had now had to take impairments to reflect the fall in valuations, wiping out 75 percent of its book value."

Abu Dhabi National Energy Co (Taqa) climbed 2.9 percent after it swung to a net profit in the fourth-quarter, helped mainly by higher commodity prices, to beat analysts' expectations.

Abu Dhabi's index ADI climbed 0.2 percent to 2,709 points

Kuwait's index KWSE edged higher, gaining for a second day since Monday's five-month low, but volumes slumped and stocks were seen trading sideways in the absence of new catalysts to entice buyers back.

National Bank of Kuwait and Kuwait Finance House dropped 1.4 and 1.6 percent respectively, but Gulf Bank and Burgan Bank each added 1.9 percent.

"Kuwait's market has been pretty much flat for the past couple of weeks, with sentiment still muted - results were largely in line with expectations and we're still waiting on the Zain deal," said Shahid Hameed, Global Investment House head of asset management for the Gulf region. "Bank stocks have no direction."

Zain ended flat. Etisalat, which has made a $12bn offer to buy a 46-percent stake Zain, expects to present the results of its due diligence to its board by the end of February.

Kuwait's index climbed 0.09 percent to 6,759 points as volumes slumped to an eight-week low

Bank Dhofar helped Oman's index MSI end higher for a sixth session, despite losers outnumbering gainers 21 to six.

Dhofar climbed 1.4 percent and telecoms operator Nawras rose 0.6 percent.

Oman's Transgulf Holding dropped 7.3 percent after the firm reported earnings, while Renaissance Services slipped 0.8 percent to ease from Tuesday's close, its highest in at least two years.

Renaissance has risen since reports it is planning to list an energy subsidiary in London.

Oman's index climbed 0.2 percent to 6,936 points.

Saudi Basic Industries Corp  (SABIC) led Saudi Arabia's index TASI higher in early trade as the kingdom's stocks braced for a possible inflow of funds when Egypt's bourse reopens on Sunday.

SABIC, Saudi Arabia's largest listed firm, climbed 0.4 percent, while Saudi Kayan Petrochemicals and Kingdom Holding each added 0.5 percent.

The index edged up 0.1 percent to 6,610 points, rebounding slightly after falling on Tuesday, its first decline in six sessions.

"I still favour Saudi, it has made a nice swing back upwards and should head towards the 7,000 level," said Musa Haddad, head of MENA equity desk at National Bank of Abu Dhabi.

He predicts many investors will pull cash out of Egypt when Cairo's bourse reopens and relocate this money to other Middle East markets, particularly Saudi Arabia.

"Like Egypt, Saudi Arabia has depth and liquidity to shift from one sector to another, while Saudi also offers stability and economic growth, plus bank provisions are also falling and oil prices are having a positive impact on petrochemicals," said Haddad.

"The UAE will also receive a portion, but Saudi is more liquid, has stronger fundamentals and technically it looks better, with the market in a medium-term uptrend."

Egypt's bourse has been closed since January 27 as protests against president Hosni Mubarak's 30-year rule continue. The exchange will reopen on Sunday, the regulator said, with trading cut to three hours from four.

London crude prices rallied more than half a percent Wednesday, back up above $100 a barrel due to tighter North Sea supplies and concerns over a strike at firms owned by the Suez canal authority, although transit through the waterway was unaffected.


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