JEDDAH/DUBAI: Saudi Basic Industries Corp. (SABIC) rebounded, lifting Saudi Arabia’s index amid broad gains on Gulf Arab markets as rising oil prices and buoyant global equities boosted regional sentiment.
SABIC climbed 6.2 percent, recovering much of Sunday’s 8 percent fall after its second-quarter profit plunged 76 percent.
“SABIC decreased sharply yesterday (Sunday) after it said it would not be paying a dividend,” said Hesham Abo-Jamee, Bakheet Investment Group head of asset management. “This was expected because it hasn’t made much profit, but investors over-reacted and the stock was over-sold, so it has rebounded today.”
The Tadawul All-Share Index (TASI) rose 0.73 percent to 5,717.65 with only 2 of the 15 sectors closing with losses on Monday; the Telecom and Transport sectors were down 2.46 percent and 0.30 percent respectively. On the positive side, gains ranged from 0.05 percent in the Banking sector to 4.47 percent in Hotel & Tourism. Overall market breadth was also positive, with 93 advancers beating out 26 decliners to form an AD ratio of 3.58, the Jeddah-based Financial Transaction House (FTH) said.
“Only 18 of the listed companies recorded an increase in net profits since the semi-annual report 2008. On the other hand, losses were widespread across the majority of the companies on TASI, the FTH said in its market commentary on Monday.
“There’s concern that Saudi banks haven’t taken large enough provisions in their second-quarter results,” said Hashem Montasser, EFG-Hermes managing director and head of regional asset management, in Dubai.
“Everyone knows about the problems at Saad and Algosaibi and people fear more family companies are in trouble, with banks not yet provisioning for the worst-case scenario.”
Saudi conglomerates Saad Group and Ahmad Hamad Algosaibi & Bros are restructuring billions of dollars of debts.
In Kuwait, telecoms operator Zain fell 1.7 percent after French firm Vivendi said it was calling off talks to buy a majority stake in Zain’s African telecoms operations, dragging Kuwait’s index lower. Qatar also fell.
The Dubai and Abu Dhabi benchmarks each advanced for the fourth straight session, adding 1.9 and 0.2 percent respectively, while Bahrain rose 0.6 percent to edge away from Sunday’s two-year closing low. Egypt’s measure moved higher for a second day.
Emaar Properties climbed 3.9 percent and was the main driver behind Dubai’s rise as speculators targeted beaten-down stocks. Union Properties surged 5.5 percent and Dubai Financial Market added 3.2 percent, with investors buoyed by the latter’s quarter-on-quarter rise in profit.
“These are stocks that have been hardest hit in the crisis and this is pure speculation,” said Wadah Al-Taha, a Dubai-based financial analyst. “When the traded value is low, it’s easier to play with stocks, before sudden profit-taking strikes to take them back to previous levels. It’s a pattern repeated every 10 days or so.”
Many analysts are bearish, despite Monday’s broad gains, with low volumes leaving few believing the markets will mount a sustained rally over the summer months.
“If Gulf sentiment is not negative, then it should be because there are many unknowns still out there,” said Keith Edwards, head of asset management at Doha-based investment company The First Investor. “Volumes will be insufficient to keep the market frothy and sentiment will deteriorate.”
Al-Taha said he expected the UAE markets to correct by the end of the week, while EFG’s Montasser warned that a retreat in oil prices would send stocks lower.
“For the most part, markets have enjoyed a pretty good run up, especially in Saudi Arabia and Egypt and so it’s hard to see them making a substantial move higher between now and the end of August,” said Montasser.
The Dubai index climbed 1.9 percent to 1,769 points and Abu Dhabi measure rose 0.2 percent to 2,681 points.
The Kuwaiti index fell 0.1 percent to 7,538 points.
The benchmark Qatari index dropped 1.1 percent to 6,295 points and the Bahrain index climbed 0.6 percent to 1,493 points.
— With input from agencies