Egypt tumbles on stamp duty worry, Q4 earnings support Saudi

DUBAI / Reuters

Egypt’s blue-chip stock index tumbled on Thursday after Reuters reported that authorities were considering temporarily reintroducing a stamp duty on stock market transactions, while Saudi Arabia was supported by quarterly corporate earnings.
The index dropped 3.7 percent, its largest single-day decline since June 2016. Local traders were heavy net sellers after a Finance Ministry source, speaking on condition of anonymity, said: “We are studying temporarily re-imposing a stamp duty on stock market transactions pending the return to a capital gains tax, which has been postponed since May 2015.”
Mohammad El Nabarwy, chief investment officer of Cairo-based HC Securities & Investment, said investors had priced in an expected three-year delay in the launch of a capital gains tax, so “the market entered panic mode”.
Wafik Dawood, portfolio manager at Compass Capital, said however that the market had overreacted. The index had soared 56 percent since the Egyptian pound was floated on Nov. 3, leaving it ripe for profit-taking. “The market needed a breather and with the strong retail participation, any dip in the market could turn into a sell-off.” Six shares in the index slumped their 10 percent daily limits, including Ezz Steel.

SAUDI ARABIA, KUWAIT
The Riyadh index edged up 0.3 percent but trading volume dropped to its lowest in 12 weeks.
The largest lender by assets, National Commercial Bank , jumped 3.9 percent after posting a 7.5 percent rise in net profit in the three months to Dec. 31 to 2.29 billion riyals ($611 million). The bottom-line was boosted by higher income from commissions and investments.
That was slightly ahead of estimates; analysts at Alistithmar Capital and SICO Capital had given forecasts for NCB’s fourth-quarter net profit of 2.0 billion riyals and 2.09 billion riyals respectively.
Al Rajhi Bank rose 0.4 percent after the kingdom’s second-largest lender reported a 5 percent rise in fourth-quarter net profit, meeting analysts’ forecasts as financing, investment and other income increased.
Shares in NCB are trading at a small discount to analysts’ average fair value estimate while Al Rajhi is trading at a premium, according to Reuters data. Saudi Basic Industries slipped 0.3 percent to 93.00 riyals. The largest petrochemical maker reported a 47.7 percent jump in fourth-quarter net profit but that was at the lower end of forecasts. SABIC said lower average operating and other non-core costs were the main reason for the rise in profit.
But PetroRabigh surged its 10 percent daily limit after it swung to a net profit of 183 million riyals in the fourth quarter from a loss of 1.01 billion riyals a year earlier, citing relatively stable operations and the positive impact on inventory valuations of feedstock price increases. Sahara Petrochemical jumped 5.1 percent after swinging to a net profit in the fourth quarter of 160 million riyals, its highest quarterly profit since the second quarter of 2014. It cited higher sales volumes, product prices and income from associates.
With most of the petrochemical sector having reported quarterly results, earnings grew by roughly 5 to 10 percent, said Santhosh Balakrishnan, senior analyst at Riyad Capital.
Among telecommunications firms, Zain Saudi climbed 2.5 percent after reporting a narrower fourth-quarter loss, marginally beating estimates as revenue increased. But Mobily fell 0.7 percent after it swung to a loss, though it beat estimates.
On Mobily, analysts at NCB Capital said: “Sales weakness is a concern while the company’s ability to control operating expenses is a key strength.”
Mouwasat Medical Services fell 2.1 percent despite posting a 34.2 percent rise in fourth-quarter net profit to 72.2 million riyals, ahead of analysts’ average forecast of 59.4 million riyals.
Builder Abdullah Abdul Mohsin Al-Khodari Sons Co rose 2.9 percent after making a fourth-quarter loss of 32.14 million riyals compared with a loss of 1.04 million riyals in the year-earlier period. EFG Hermes had forecast a net loss of 42.84 million riyals. Khodari said contract awards in the fourth quarter rose.
Kuwait’s index, which is usually thinly traded, continued to gain and added 1.3 percent in the heaviest daily volume since 2013. The index is up 11.8 percent since Jan. 1, outperforming other regional and most emerging markets. Telecommunications operator Zain climbed 2.2 percent on Thursday.
EGF Hermes said in a note the reasons for the strong volumes were unclear but it believed weaker real estate prices were pushing money into other assets, and local brokers reported high participation among local investors. Also, foreign investors were significantly underweight, and were probably trying to
catch up.