Saudi rally ends as troops enter Bahrain

Kingdom posts first decline in eight sessions, trimming its gains to 17% since March 2's 22-month low
Saudi rally ends as troops enter Bahrain
BOURSE UPDATE Dubai Financial Market, the only Gulf Arab stock market to sell shares to the public, fell 3.8 percent before announcing earnings later today (Getty Images)
By Reuters
Mon 14 Mar 2011 01:23 PM

Saudi Arabia bluechips declined after the kingdom sent troops to Bahrain to
quell escalating unrest in its island neighbour, raising fears of a wider
regional contagion.

Al Rajhi Bank fell 2.6 percent, Samba Financial Group lost 1.4 percent and
Saudi Arabian Fertilizers Co (SAFCO) dropped 2.5 percent.

"The markets had gone up a lot and what's happening in Bahrain is
concerning - we don't know how this will end," said Hashem Montasser,
managing partner at Frontlane Capital, a Dubai-based asset management firm.

"People were under the impression the Bahrain situation would be
resolved quite quickly…the risk profile of the GCC remains elevated."

Saudi Arabia has sent troops to Bahrain in a move Shi'ite opponents of the
Saudi-allied Sunni rulers of the Gulf kingdom called a declaration of war.

"The market was starting to price in some return to stability
especially on the back of a peaceful weekend," said Walid Shihabi, Shuaa
Securities chief executive.

"This certainly counts as an escalation, although it's still very much
contained within Bahrain."

A security clampdown in the Saudi capital kept a lid on a planned day of
rage on Friday.

The kingdom's index fell 1.3 percent to 6,231 points, its first decline in
eight sessions and trimming its gains to 17 percent since March 2's 22-month
low.

Qatar's index QSI ended lower for a first session in five, tracking regional
declines, while traders betting that Qatar Gas Transport Co (Nakilat) will
benefit from increased exports to Japan may be disappointed.

Nakilat ended 1.3 percent lower, having gained in early trading.

An estimated 20 percent of Qatar's liquefied natural gas (LNG) exports were
shipped to Japan and these were likely to increase following Friday's
devastating earthquake, said Scott Darling, Nomura analyst.

"We do not expect significant profitability upside for Nakilat, Qatar's
LNG shipper," Darling wrote in a note to clients.

"The company's LNG ships are essentially under fixed, long term
shipping rates which are essentially immune to spot rates.

"While disruption to Japan's LNG infrastructure seems limited which will
allow Nakilat to divert more ships to the country, the economic upside on
higher spot LNG cargoes is likely to be a benefit to the producers and perhaps
spot LNG shippers."

Qatar National Bank fell 2.1 percent and Masraf Al Rayan lost 2.7 percent.

Qatar's measure dropped 1.8 percent to 8,302 points, easing from Sunday's
three-week high.

Emaar Properties headed losers as Dubai's index DFM ended lower for a first
session in five, with worries about unrest in Bahrain and downbeat global
sentiment following Japan's earthquake spurring traders to sell.

Emaar fell 4.8 percent, easing from Sunday's three-week high, Arabtec dropped
3.4 percent and Dubai Financial Market lost 3.8 percent.

The index dropped 2.5 percent to 1,475 points as volumes decline by a third
from a day earlier and losers outnumber gainers 19 to two.

"What's going on now is normal technical correction from what we have seen
in the last two weeks," said Samer Al Jaouni, general manager of Middle
East Financial Brokerage Co.

"We haven't seen huge volumes, and after the sell off today, the market
might take another one or two days consolidating at these levels and then it will
be back to the same circle of geopolitical effects and what's happening in
other markets regionally."

Oil prices were down 2 percent at $99.14 a barrel on investor fears economic
growth will slow after Japan's earthquake. Declining Japanese economic activity
could potentially weigh on demand for oil and with it state revenues in the
world's top crude exporting region.

These concerns should spur investors to seek safe havens like the dollar and
gold, said Marwan Shurrab, vice-president and chief trader at Gulfmena
Alternative Investments, rather than riskier assets such as equities, at least
in the short term.

"Japan is a very big consumer of commodities and oil products," he
added.

Stocks in Abu Dhabi, home to the bulk of the UAE's oil reserves, also
retreat. Aldar Properties and National Bank of Abu Dhabi dropped 2.2 and 3
percent respectively.

Abu Dhabi's index ADI fell 1 percent to 2,629 points.

Bahrain has asked for help from neighbouring Gulf Arab countries after
protesters overwhelmed police and cut off roads, and an adviser to the royal
court has said the forces were already on the strategic island kingdom.

Agility helped Kuwait's index KWSE ended higher for a fifth session after
the logistics provider said it will acquire a minority stake in an Iraqi
telecoms firm, while some Kharafi-linked stocks also rallied.

Agility climbed 2.6 percent after the company and France Telecom said they
will buy a 44 percent stake in fast-growing Iraqi mobile operator Korek
Telecom.

"The Iraqi market still has high growth potential and it only has three
players," Scott Darling, Nomura analyst, wrote in a research note.

"The deal seems attractive on a valuation point of view, but with
Agility's focus on logistics and with the stake only contributing to [around]
15 percent of our valuation, this does not change our investment case on the
company."

Agility's shares were down 63 percent since it was charged in November 2009
with defrauding the US military on supply contracts to the Middle East, with
the case still unresolved.

"Uncertainty over the extent of the company's liability remains a risk
in 2011," Darling added.

"The reputational damage and lack of US contract bidding after over a
year's suspension is likely to see limited earnings growth, and more downside
than upside risk."

Egypt Kuwait Holding climbed 6.8 percent and Kuwait Food Co rose 1.3
percent, but National Industries Group dropped 3.6 percent after surging 7.7
percent a day earlier.

These firms are part-owned by the Kharafi group, the architect of a $12bn
deal to sell a controlling stake in telecoms operator Zain to the UAE's
Etisalat.

Investors are betting this deal, which was first announced in September and
has faced numerous hurdles including strong opposition from some Zain
shareholders, is now more likely to succeed after sources said Reuters that
Zain's board had accepted a bid for its quarter-stake in affiliate Zain Saudi.

Etisalat is already active in Saudi Arabia through unit Mobily and so cannot
hold a stake in another operator.

Zain's shares were suspended from Monday trade.

Kuwait's index rose 0.2 percent to 6,407 points, taking its gains to 4.4
percent since March 7's six-year low.

Oman's benchmark index MSI fell in declining volumes following renewed
protests in Bahrain.

Bank Muscat, up 0.6 percent, and Renaissance Services, down 3.3 percent,
accounted for about a third of all shares traded on the index. The benchmark
slipped 0.3 percent to 6,401 points, its first decline in five sessions.

"There is some selling pressure from the retail sector [and] from
foreign institutions because of what's going on in the region, especially
Bahrain," says Adel Nasr, United Securities brokerage manager.

"There are still a lot of geopolitical issues in the region. There is
uncertainty and it will continue for a while."

In the longer term, attractive valuations and expectations that sustained
protests in the region will have little real impact on Gulf Arab economies will
draw foreign investors to Oman shares, says Nasr.

"They believe that nothing major will happen in the region and the
fundamentals [of companies] are still strong," adds Nasr.

Bahrain has asked for help from neighbouring Gulf Arab countries after
protesters overwhelmed police and cut off roads, and an adviser to the royal
court has said the forces were already on the strategic island kingdom.

 

For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.

Subscribe to our Newsletter

Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.