20/07/2010 00:00 AST
Saudi Arabia’s Sabic ended flat yesterday, recouping early losses sparked by the petrochemical producer’s below-forecast earnings, while most Middle East markets tracked global exchanges slightly higher.
Saudi Arabia’s index rose 0.2% to 6,131 points.
Dubai’s index climbed 0.7% to 1,518 points. Abu Dhabi’s index gained 0.3% to 2,534 points.
Oman’s index inched up 0.1% to 6,227 points. Kuwait’s index rose 0.1% to 6,501 points. Bahrain’s index climbed 0.2% to 1,401 points.
Sabic, the largest Arab listed company, ended unchanged at 87.75 riyals, having fallen as much as 2.6% intraday after reporting a second-quarter profit of 5.02bn riyals ($1.34bn), 11% below an average of forecasts as declining product prices hit revenues.
“Sabic remains a pure play on the global economy,” Credit Suisse wrote in a research note. “One cannot ignore the signs of lower pace of recovery which increase the uncertainty of demand outlook...with the recent recovery in crude oil prices, we might see an improved pricing environment by Q4.”
Credit Suisse kept its outperform rating and price target of 120 riyals and other analysts said the stock remained cheap, although doubts remain over the sector’s growth prospects.
“The wider expectation is for petrochemicals earnings to have peaked for this year in the first quarter and for margins and profitability to decline,” said a petrochemicals analyst who asked not to be identified.
Savola Group dropped 2.3% after its second-quarter profit fell, but Saudi Arabia’s index rose 0.2% to end a five-session losing streak.
Abu Dhabi’s Aabar Investments rose 9.6% to 1.72 dirhams, surging for a second day since the market regulator told the company to increase its buyback offer price to minority investors to 1.95 dirhams per share as it seeks to delist from the bourse.
Emirates Telecommunications Corp (Etisalat) fell 0.5% to 10.35 dirhams after its second-quarter profit dropped 21%, while domestic rival Du added 0.5%.
“Etisalat revenues were in line with expectations, but net income fell short,” said Irfan Ellam, Al Mal Capital telecoms analyst. “We still think the stock offers strong upside.”
Al Mal kept a “buy” recommendation on the stock, setting a price target of 14.66 dirhams.
“Du is a factor because we estimate 85% of Etisalat’s revenues still come from domestic operations,” added Ellam.
“We would normally expect revenue to increase year-on-year and quarter-on-quarter for companies that are performing well, but the latter was only marginally up and that was probably because of more domestic competition.”
A selloff in global stocks lost steam yesterday and the euro erased losses.
“We seem to be following global equity markets,” said Robert McKinnon, ASAS Capital chief investment officer.
“Other than that, we’re waiting for more regional earnings and there could be some positive surprises, but these are more likely to come in the third and fourth quarters, with the focus on banks.
“By then, we may see banks turn the corner in terms of provisioning - it’s a waiting game and this would be the main gauge for the regional economies and particularly the UAE.”
Reuters
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