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Wed 15 Apr 2015 07:16 PM

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Strong earnings fuel Saudi, Dubai stock market surges

Dubai's index jumps 3% on its heaviest trading volume this year, hitting a two-month closing high

Strong earnings fuel Saudi, Dubai stock market surges

Positive earnings reports and stronger oil boosted most major Gulf markets on Wednesday, while stocks in energy-importing Egypt were soft.

The main Saudi index jumped 2.2 percent to 9,164 points, a three-week closing high, as National Commercial Bank (NCB), the kingdom's biggest lender, climbed 2.3 percent.

NCB posted a 2.8 percent rise in first-quarter net profit to 2.61 billion riyals ($696 million), above SICO Bahrain's forecast of 2.15 billion riyals.

Rival lender Bank Al Jazira surged 4.1 percent after its first-quarter profit rose 43 percent, well ahead of the estimate of Albilad Capital, which had predicted a 13 percent increase.

Saudi Cement gained 1.9 percent, its 5.9 percent increase in first-quarter net profit beating analysts' average estimate.

Saudi Electricity Co rose 1.5 percent after deputy electricity minister Saleh al-Awaji, who is also the company's chairman, said the kingdom should eventually consider raising its domestic water and power prices. If implemented, that would boost the utility's bottom line.

Petrochemicals giant Saudi Basic Industries (SABIC) rose 2.0 percent as oil prices climbed, although its subsidiary Saudi Arabia Fertilizers Co (SAFCO) fell 1.5 percent after its first-quarter net profit tumbled 30 percent.

Brent crude rose 1.2 percent on Wednesday amid fighting in Yemen and signs of a dip in US production.

The UN Security Council on Tuesday imposed an arms embargo targeting the Iran-allied Houthi rebels who now control most of Yemen as battles in the south of the country intensified. The move is a diplomatic boost for Saudi Arabia, which leads a coalition fighting the Houthis.

Dubai's index jumped 3.0 percent on its heaviest trading volume this year, hitting a two-month closing high of 3,942 points and posting its biggest daily gain in 10 weeks. It now faces strong technical resistance at the late December peak of 4,008 points, from which it has pulled back three times in recent months.

Dubai Islamic Bank (DIB) was the main support, surging 5.3 percent to 6.75 dirhams in active trade. DIB's net profit attributable to shareholders rose 33.9 percent year-on-year to 816.7 million dirhams ($222.4 million), beating analysts' estimates; EFG Hermes had forecast 751.21 million dirhams and HSBC had expected 677 million dirhams.

The stock rose above its 100-day average, now at 6.56 dirhams, for the first time since November; it faces resistance at the March peak of 6.84 dirhams.

Deyaar Development rose 3.9 percent. The firm became the first Dubai real estate company to post earnings this season and reported a 6 percent rise in first-quarter net profit, well ahead of SICO Bahrain's forecast.

The profit rise was especially reassuring to investors against the background of a gradual slowdown in Dubai's property market over recent months.

Other property-related stocks also rose: developer DAMAC jumped 3.6 percent, Union Properties surged 7.0 percent and builder Arabtec gained 3.7 percent.

Abu Dhabi developer Aldar Properties, up 3.5 percent, was the main support for that emirate's index, which edged up 0.6 percent.

Reflecting improving sentiment across the region, Qatar pared early losses and closed 1.0 percent higher as most stocks rose. Qatari Investors Group, whose main business line is cement production, surged its daily 10 percent limit ahead of the publication of its quarterly earnings.

Oman's index slipped 0.2 percent as Omantel fell 1.2 percent after saying the sultanate's regulator had fined it 5 million rials ($13.0 million) for a service interruption last year, a decision the company would appeal.

But Bank Dhofar added 1.1 percent after posting a 15.3 percent increase in first-quarter profit. The lender made 11.78 million rials in the quarter, while EFG Hermes and Gulf Baader Capital Markets had forecast 11.16 million rials and 10.85 million rials respectively.

Egypt's index edged down 0.4 percent in a broad decline despite some positive news, such as the announcement from Palm Hills Development that it had doubled contracted sales in the first quarter. The stock tumbled 4.1 percent.

"I think it's profit-booking ahead of the earnings season," a Cairo-based analyst said, adding that investors were becoming unhappy with the slow implementation of economic reforms announced earlier this year. "And then you have Yemen."

Egypt said on Tuesday that it and Saudi Arabia had discussed holding a "major military manoeuvre" in Saudi Arabia with other Gulf states, in a sign that members of the Sunni Arab coalition attacking the Houthi rebels in Yemen might carry through on threats to eventually follow their air campaign with a ground intervention.

Egypt is fighting its own insurgency in the north of the country, where two military academy students were killed and six were wounded on Wednesday by a bomb targeting a minibus.

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