Record Egypt stock rally stalls as traders cash in; Saudi gains

BLOOMBERG

Egyptian stocks declined after investors locked in gains from the longest winning streak on record, ending a rally fueled by the biggest currency devaluation in more than a decade. Saudi Arabian shares rose.
The EGX 30 Index dropped 0.3 percent at the close in Cairo, after rising for 11 straight days in the longest rally since Bloomberg started tracking the measure in 1998. About 408 million shares traded, double the one-year daily average. Saudi Arabia’s Tadawul All Share Index gained 1.4 percent, moving closer to a bull market.
Investors piled into Egyptian stocks after the central bank weakened the currency 13 percent last week, the most since 2003, as part of a plan to lure foreign investment and alleviate a dollar shortage that has crippled North Africa’s biggest economy. The EGX 30 entered a bull market this month and is now up 31 percent from a two year-low in January, even after the biggest interest rate increase in at least 10 years on Thursday.
“We saw a bit of profit taking today, which is very healthy following the strong gains of last week,” said Khaled Darwish, who helps manage 10 billion Egyptian pounds ($1.1 billion) of assets at Cairo-based CI Capital Asset Management. “Investors are still waiting for an IMF agreement, more currency devaluation or inflows of foreign capital. Any of these could be a catalyst for more gains.”
The nation is preparing to start loan talks with the International Monetary Fund to help tackle its dollar issues, according to a senior government official. Central bank Governor Tarek has denied the plans.

Dollar Auctions
The interest rate increase could also “reflect negatively” on the market in the short term, Darwish said.
Egyptian Financial Group-Hermes Holding was the largest contributor to the index’s decline in Cairo as the investment bank dropped 4.4 percent, the most in more than a month. Property developer Six of October Development & Investment Co. had the biggest percentage move, jumping 6 percent on four times the daily average trading volume in the past three months. The company said last week 2015 profit more than doubled.
Egypt’s central bank is cutting the number of weekly dollar auctions, with $120 million being offered this week in a single session instead of the regular three, Aswat Masriya news website reported, citing Governor Tarek Amer. Sales will take place on Tuesday, two bankers with knowledge of the matter said.
The government sold three-month Treasury bills today at an average yield of 13.061 percent, compared with 11.591 percent a week ago, according to data posted on the Finance Ministry’s website. The average yield on nine-month securities was 13.987 percent, up from 12.478 percent.

Saudi Nears Bull
The Tadawul All Share Index was the biggest advancer in the Gulf, climbing 1.4 percent its third day of gains. The gauge is now about 1 percent from a so-called bull market, having increased 19 percent from a January low. Jabal Omar Development Co. led Sunday’s increase, adding 6.7 percent.
The kingdom’s central bank will issue 20 billion riyals ($5.3 billion) of bonds this week, according to local news website Maaal.com, which cited unidentified people familiar with the plan. The offering includes both fixed and floating-rate notes with three-, five- and seven-year maturities.

Abu Dhabi Drops
Abu Dhabi’s ADX General Index fell 2.4 percent, the biggest slump in two months. The gauge had climbed the most in seven weeks on Thursday. First Gulf Bank PJSC and Emirates Telecommunications Group Co., which together account for more than half of the gauge, led the emirate’s stocks lower.
First Gulf Bank declined 6.6 percent after rising 11 percent on Thursday. Etisalat dropped 1.9 percent, falling for a second day. The largest telecommunications operator in the United Arab Emirates, which shares a monopoly with Dubai’s Du, has retreated from the highest level in a decade this month after its 14-day relative strength index rose to 88, well above the 70 level that signals a security is overbought.
“The market is correcting itself following a strong and quick rally,” said Tariq Qaqish, the head of asset management at Dubai-based Al Mal Capital PSC, which manages more than $160 million in equities and bonds across the Middle East and North Africa. “Provided that global stocks and oil continue to rise, the drop we’re seeing today will probably be short-lived. We’re looking at buying opportunities in businesses negatively correlated to oil such as the telecoms sector, as well as high- beta real estate stocks.”

Dubai Rises
The six-nation Gulf Cooperation Council is home to about 30 percent of the world’s proven oil reserves, and nations in the region depend on income from crude to finance government spending. While Brent, a benchmark for half the world’s oil, fell on Friday, it closed higher for a fourth week, at $41.20 per barrel. The Bloomberg GCC 200 Index, which tracks the region’s biggest companies, added 0.2 percent.
Dubai’s DFM General Index rose 0.1 percent, led higher by Arabtec Holding Co. The largest listed U.A.E. construction company climbed 6.8 percent as about 115 million shares exchanged hands, a fifth of volume on the gauge. Arabtec won a 1.7 billion-dirham ($463 million) contract to build villas in Mohamed Bin Zayed City, Fujairah, according to a bourse filing after the market close.
Emaar Properties PJSC, the developer of the world’s tallest tower and the company with the largest weighting on the index, lost as much as 3 percent after its board proposed a 2015 dividend of 15 fils per share. Emaar’s 2015 profit beat analyst expectations as revenue from apartment sales more than doubled. The shares closed 1.4 percent lower.
“Some investors expected higher dividends from Emaar,” Qaqish said.

Qatar Resistance
Qatar’s QE Index swung between gains and losses before closing 0.1 percent lower at 10,414.65. While volumes have increased in recent trading sessions — about 7.5 million shares traded, compared with a six-month average of 6.1 million — the gauge hasn’t broken the 10,500 resistance level since early December.
Gulf International Services QSC slipped 0.4 percent. The company said one of its units is optimizing costs as five offshore drilling rigs, one onshore rig, and one accommodation jack-up have been released from existing contracts. Gulf Drilling International is exploring potential new business opportunities throughout the GCC, it said.
Oman’s MSM 30 Index rose 0.4 percent in a third day of gains. Bahrain’s BB All Share Index advanced a fourth day, climbing 0.6 percent. Kuwait’s SE Price Index declined 0.1 percent.

Israel Climbs
Israel’s TA-25 Index increased 0.3 percent at 3:29 p.m. in Tel Aviv, extending this month’s gains to 3.4 percent. Opko Health Inc.’s 4.8 percent jump led the gauge higher, following an increase in its U.S.-traded shares last week. The stock climbed to the highest level since Dec. 10.