JEDDAH: Major Gulf markets fell moderately after oil prices and global bourses pulled back.
Saudi Arabia’s Tadawul All-Share Index dropped 0.5 percent with most banks and many second-tier stocks weak, though Arabian Pipes, a supplier to oil giant Saudi Aramco, rose 1.2 percent in unusually heavy trade.
The Capital Market Authority said late on Wednesday that it would relax curbs on foreign institutional investors on Sept. 4, sooner than the mid-2017 deadline previously indicated.
Among the reforms are a much lower minimum assets-under-management requirement for foreign institutions, and an easing of restrictions on foreign ownership of individual shares.
But while fund managers say the changes are good news, they believe there may not be any sudden increase of foreign fund inflows into Saudi Arabia, given the economic slowdown there.
Over the long term, the reforms are expected to help persuade international index compiler MSCI to add Saudi Arabia to its emerging markets index, would attract billions of dollars of fresh foreign money to the Kingdom.
But EFG Hermes said in a note that it still thought May 2019 was the earliest inclusion date for Saudi Arabia in the MSCI index and that it was too soon for investors to position themselves for foreign fund inflows.
EFG remains underweight on Saudi equities “given the continued domestic liquidity crunch, weak economic and earnings growth outlook, and continuing uncertainty about the sustainability of earnings until the subsidy removal timeline becomes clearer,” the investment bank said.
No Saudi stocks are currently close to hitting their old, pre-reform ceilings for foreign institutional ownership, though petrochemical company Alujain has a ratio of 4.1 percent, the market’s highest, the latest bourse data shows. Its shares climbed 2.1 percent on Thursday.
Elsewhere, Abu Dhabi’s index dropped 0.3 percent as Waha Capital sank 2.0 percent after it reported a 22 percent year-on-year drop in second-quarter net profit because of lower income from financial investments and higher costs.
Dubai’s index edged down 0.2 percent as construction firm Arabtec, expected to announce second-quarter earnings on Sunday, dropped 0.7 percent and was the most heavily traded stock.
Qatar fell 0.4 percent as Dlala Brokerage lost 0.7 percent. It reported an 808,000 riyal ($222,000) profit for the second quarter, swinging from a 23.4 million riyal loss a year ago.
Egyptian stocks rose after Cairo and the IMF said they had agreed on a $12 billion loan.
Egypt’s index climbed 1.0 percent to a 13-month closing high after Cairo reached a preliminary three-year, $12 billion funding deal with the International Monetary Fund.
But although the loan may ease pressure on Egypt’s finances and bolster the confidence of foreign investors, many fund managers said they were not rushing to buy stocks because of concern about how the deal would be implemented.
The index’s rise was mainly due to a 2.1 percent gain in Commercial International Bank, a favorite of foreign investors, and a 2.4 percent surge by real estate firm Talaat Mostafa. Most other major stocks moved little, and eight of the 10 most heavily traded shares dropped.
In late 2012, Egypt reached an initial deal with the IMF for a $4.8 billion loan, but the agreement never went through because of political instability.
The current agreement is more likely to be implemented, but some investors said they needed to see the details of reforms attached to the loan, such as the introduction of value-added tax and the phasing out of state subsidies.
“As a headline the news is good, but the devil will be in the details,” said Sebastien Henin, head of asset management at Abu Dhabi-based The National Investor.
A senior Egyptian banker in Cairo said the market’s rise was not broad-based because investors knew the economy still faced difficult times.
“Of course if the IMF gives final approval for the loan, it will be great news, but I believe that due to the requirements set by the IMF, subsidies will gradually decrease...Fuel prices will increase in time and VAT will be applied.”
Some analysts expect the IMF loan to pave the way for another devaluation of the Egyptian pound, which could in the long term boost exports and attract more foreign money but might in the short term mean fresh instability and uncertainty.
Investment bank EFG Hermes sank 2.4 percent on Thursday after it posted a second-quarter net loss of 67.6 million Egyptian pounds ($7.6 million) due to extraordinary tax charges linked to its sale of a stake in Credit Libanais.
Saudi Arabia’s Tadawul All-Share Index dropped 0.5 percent with most banks and many second-tier stocks weak, though Arabian Pipes, a supplier to oil giant Saudi Aramco, rose 1.2 percent in unusually heavy trade.
The Capital Market Authority said late on Wednesday that it would relax curbs on foreign institutional investors on Sept. 4, sooner than the mid-2017 deadline previously indicated.
Among the reforms are a much lower minimum assets-under-management requirement for foreign institutions, and an easing of restrictions on foreign ownership of individual shares.
But while fund managers say the changes are good news, they believe there may not be any sudden increase of foreign fund inflows into Saudi Arabia, given the economic slowdown there.
Over the long term, the reforms are expected to help persuade international index compiler MSCI to add Saudi Arabia to its emerging markets index, would attract billions of dollars of fresh foreign money to the Kingdom.
But EFG Hermes said in a note that it still thought May 2019 was the earliest inclusion date for Saudi Arabia in the MSCI index and that it was too soon for investors to position themselves for foreign fund inflows.
EFG remains underweight on Saudi equities “given the continued domestic liquidity crunch, weak economic and earnings growth outlook, and continuing uncertainty about the sustainability of earnings until the subsidy removal timeline becomes clearer,” the investment bank said.
No Saudi stocks are currently close to hitting their old, pre-reform ceilings for foreign institutional ownership, though petrochemical company Alujain has a ratio of 4.1 percent, the market’s highest, the latest bourse data shows. Its shares climbed 2.1 percent on Thursday.
Elsewhere, Abu Dhabi’s index dropped 0.3 percent as Waha Capital sank 2.0 percent after it reported a 22 percent year-on-year drop in second-quarter net profit because of lower income from financial investments and higher costs.
Dubai’s index edged down 0.2 percent as construction firm Arabtec, expected to announce second-quarter earnings on Sunday, dropped 0.7 percent and was the most heavily traded stock.
Qatar fell 0.4 percent as Dlala Brokerage lost 0.7 percent. It reported an 808,000 riyal ($222,000) profit for the second quarter, swinging from a 23.4 million riyal loss a year ago.
Egyptian stocks rose after Cairo and the IMF said they had agreed on a $12 billion loan.
Egypt’s index climbed 1.0 percent to a 13-month closing high after Cairo reached a preliminary three-year, $12 billion funding deal with the International Monetary Fund.
But although the loan may ease pressure on Egypt’s finances and bolster the confidence of foreign investors, many fund managers said they were not rushing to buy stocks because of concern about how the deal would be implemented.
The index’s rise was mainly due to a 2.1 percent gain in Commercial International Bank, a favorite of foreign investors, and a 2.4 percent surge by real estate firm Talaat Mostafa. Most other major stocks moved little, and eight of the 10 most heavily traded shares dropped.
In late 2012, Egypt reached an initial deal with the IMF for a $4.8 billion loan, but the agreement never went through because of political instability.
The current agreement is more likely to be implemented, but some investors said they needed to see the details of reforms attached to the loan, such as the introduction of value-added tax and the phasing out of state subsidies.
“As a headline the news is good, but the devil will be in the details,” said Sebastien Henin, head of asset management at Abu Dhabi-based The National Investor.
A senior Egyptian banker in Cairo said the market’s rise was not broad-based because investors knew the economy still faced difficult times.
“Of course if the IMF gives final approval for the loan, it will be great news, but I believe that due to the requirements set by the IMF, subsidies will gradually decrease...Fuel prices will increase in time and VAT will be applied.”
Some analysts expect the IMF loan to pave the way for another devaluation of the Egyptian pound, which could in the long term boost exports and attract more foreign money but might in the short term mean fresh instability and uncertainty.
Investment bank EFG Hermes sank 2.4 percent on Thursday after it posted a second-quarter net loss of 67.6 million Egyptian pounds ($7.6 million) due to extraordinary tax charges linked to its sale of a stake in Credit Libanais.
