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Tue 28 Sep 2010 10:03 AM

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Saudi petchems slip as global market wobbles weigh

UPDATE 4: Dubai's Emaar Properties falls 0.8% ahead of a board meeting on Wednesday.

Saudi petchems slip as global market wobbles weigh
STOCK WATCH: Dubais Emaar Properties fell 0.8 percent ahead of a board meeting on Wednesday. (Getty Images)

Saudi petrochemical stocks fell on Tuesday as fresh wobbles on regional and global markets spurred investors to reduce positions ahead of the kingdom's third-quarter earnings season, which starts next week.

Saudi Basic Industries Corp (SABIC) lost 1.1 percent and Yanbu National Petrochemical Co dropped 2.3 percent.

"We have Q3 around the corner so there is hesitation and people definitely don't want to take fresh positions," said a Riyadh-based trader who asked not to be identified.

"Uncertainty is also creeping back into global markets and U.S. treasury yields are falling, which shows risk aversion is increasing. That is being translated into Saudi petrochemicals, which have come off in the past couple of days."

Petrochemicals are seen as a proxy for the world economy.

US treasuries have risen in five of the past six sessions, shrinking yields, while global markets are down slightly on Tuesday.

Samba Financial Group dropped 2 percent as Saudi banks fell.

"Banks' operational income continues to grow, but analysts don't know how much provisions they are likely to take," said Hesham Tuffaha, Bakheet Investment Group head of research.

"So people are wary of buying bank stocks, but this is offset by attractive valuations."

Dubai's Emaar Properties fell 0.8 percent ahead of a board meeting on Wednesday, which will discuss mortgage affiliate, Amlak, a local newspaper said.

On Sunday, Dubai Islamic Bank acquired a controlling stake in rival mortgage provider, Tamweel. Amlak and Tamweel shares have been suspended since November 2008, pending a mooted merger of the two firms.

Both companies have struggled since the financial crisis destroyed their business model of funding long-term mortgage lending with short-term borrowing, while Dubai property prices have dropped some 60 percent from 2008 peaks.

"I don't think a merger will happen now - it looks like they will be solved as individual cases," said Samer al-Jaouni, general manager of Middle East Financial Brokerage Co.

Dubai's index DFM fell 0.5 percent, declining for a second day since Sunday's 19-week peak.

"The market is mostly boring, with Dubai confirming 1,700 to 1,750 points is a resistance that needs a surge in volumes to break through," said Mohammed Yasin, CAPM Investment's chief investment officer.

Tuesday's highlights:

Dubai

* The index DFM fell 0.5 percent to 1,690 points.

Abu Dhabi

* The measure ADI slipped 0.1 percent to 2,661 points.

Kuwait

* The index KWSE climbed 0.6 percent to 6,870 points.

Qatar

* The benchmark QSI rose 0.2 percent to 7,647 points.

SAUDI ARABIA

* The measure TASI fell 0.7 points to 6,404 points.

Oman

* The index MSI dropped 0.3 percent to 6,500 points.

Bahrain

* The index BAX fell 0.2 percent to 1,451 points. (Reuters)

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