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DUBAI / Reuters
Stock markets in the Gulf diverged on Monday with Saudi Arabia’s index cooling for a third session as investors book profits on lofty prices while Abu Dhabi rebounded slightly.
Egypt hit yet another 8-year high as foreign investors continued to reprice equities as the local currency weakened against the U.S. dollar.
Riyadh’s main index fell 1.1 percent in modest trade, with roughly 70 percent of the traded shares declining. It is now down 2.3 percent over the past three sessions but is still up 14.9 percent over the last 30 days.
Banking shares, which have been the chief gainers over the past four weeks, were hard hit with all but two of the listed lenders closing lower.
Blue-chip Samba Financial Group lost 4.4 percent to 21.90 riyals and Saudi British Bank fell 4.7 percent. Shares in both lenders are now trading close to the expected fair price of analysts, according to Thomson Reuters data, a sign that long term value-traders will have little impetus to add further shares to their portfolios.
“For over a month the stock market has been performing in a silo, disconnected from the global environment even somewhat dislocated from the movement in crude oil prices,” said a Riyadh-based portfolio manager.
Over the past month, Brent oil is down 9.5 percent while the petrochemical sector is up 8.3 percent. On Monday, however, despite a bounce in crude oil prices over $47 a barrel the majority of the listed oil-derivative shares fell. National Petrochemical Co fell 2.9 percent.
Abu Dhabi’s index rose 0.2 percent after falling 1.7 percent on Sunday. Abu Dhabi Commercial Bank climbed 0.3 percent and Union National Bank added 0.7 percent.
On Sunday, UNB dropped 5.2 percent and ADCB lost 2.7 percent after both lenders issued separate statements denying last week’s Bloomberg report that they were involved in merger talks.
Abu Dhabi Islamic Bank ended flat after pulling back 0.8 percent on Sunday after the lender said that it has no plans to merge with Alhilal Bank.
Dubai’s Shuaa Capital jumped 10.8 percent, taking its gains over the last two session to 19.1 percent as investors were optimistic that its new shareholder, Abu Dhabi Financial Group, will unlock value for the investment firm. Shares in Shuaa are now trading at roughly 2.5 times the acquisition price of 0.705 dirham a share.
Shares in other second-tier companies, usually traded by local traders, also climbed, helping carry Dubai’s main index 0.1 percent higher. Union Properties jumped 9.8 percent.
EGYPT DEFIANT
Cairo’s index of the most active shares gained 2.4 percent taking the index to yet another 8-year high in heavy trade.
Foreign funds, which have been aggressive buyers of Egyptian blue chips since the currency was floated on Nov. 3, were net buyers on Monday, bourse data showed.
The Egyptian pound weakend on Monday, trading between 17.30 to 17.70 against the dollar. The further the pound falls the cheaper local currency denominated shares are for foreign buyers.
Exotic Partners, a Dubai-based investment firm, said in a note that there has been a shift in trading strategy when picking Egyptian equities, and analysts are now favouring those shares with “distressed valuations” over the banks, U.S dollar biased stocks and real estate related shares.
Some of their top picks include Telecom Egypt, Palm Hills Development, Egypt Kuwait Holding and Oriental Weavers. Shares in all those stocks closed higher on Monday with , except Egypt Kuwait Holding which fell back 5.0 percent on profit taking.
The index has now risen 35.4 percent since the currency float and is up 64.8 percent year-to-date.