18/08/2014 02:48 AST
Blue-chip stocks lifted Saudi Arabia’s bourse to a new six-and-a-half year peak yesterday, while other Middle East markets were mixed as low volumes led to choppy trading and a lack of clear direction.
The Saudi index rose 0.5% to 10,639 points, its highest finish since January 2008 and its 13th gain in the 15 sessions since authorities announced plans to allow direct foreign ownership of shares early next year. At present, foreigners can only own shares via instruments such as total return swaps.
Rohit Chawdhry, Gulf Baader Capital Markets head of asset management in Muscat, estimates foreigners’ Saudi shareholdings account for less than 1% of market capitalisation, compared with 9% in Qatar and the UAE.
“The Saudi equity market opening up to foreigners will have a structural, positive impact on sentiment,” said Chawdhry. “The macro (environment) is suggestive of a build-up in foreign inflows in Saudi stocks over the next year or two, geopolitical risks notwithstanding.”
Fourteen of the 20 largest Saudi stocks gained. These included Saudi Basic Industries Corp (Sabic), the Gulf’s biggest listed firm, which rose 0.3%, plus lender SABB and Banque Saudi Fransi, which climbed 1.7 and 2.2% respectively.
“Petrochemicals stocks are very promising - Sabic is probably the cheapest global petrochemical producer and I expect it will be one of the first stocks to be allowed direct foreign ownership,” said Chawdhry. “Being one of the key strengths of the kingdom, the petrochemical stocks are likely to attract sizeable foreign inflows.”
Meanwhile, Cairo’s benchmark rose 0.6% to a six-year peak, despite declines in 18 of the 25 biggest stocks.
Mobile operator Mobinil was the main support, jumping 7.9% although only 3,119 shares traded.
EFG Hermes fell 2.1%. The investment bank swung to a second-quarter profit, but that was insufficient to deter traders booking gains from Thursday’s three-and-a-half year high.
Abu Dhabi’s index had gained in five of the preceding six trading days but could not sustain this momentum and it also fell 0.7% as traders sold banking stocks. First Gulf Bank dropped 1.3%, easing from Thursday’s record peak, while National Bank of Abu Dhabi and Abu Dhabi Islamic Bank lost 2.0 and 2.9% respectively.
FGB and some other banking stocks had outperformed recently, with upbeat earnings spurring long-term investors to buy in ahead of year-end dividends, said Marwan Shurrab, fund manager and head of trading at Vision Investments.
Dubai slipped 0.5%. Volatility has declined markedly - the measure has moved within a 230-point range in August, compared with a range of about 1,200 points in July - and lacklustre trading looks likely to persist this week.
“The market is in a consolidation phase,” said Shurrab.
He predicted UAE markets would remain quiet until September, although trading volumes may increase towards the end of August as some investors take positions in anticipation of a pick-up in the following month.
Elsewhere in the Gulf, Kuwait’s index rose 0.4% to 7,266 points; Oman’s measure rose 0.2% to 7,336 points, while Bahrain’s index was flat at 1,477 points.
Reuters
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