JEDDAH – Most Gulf Arab markets fell Tuesday as an early-year rally gave way to consolidation, with investors now wanting to see if first-quarter results can justify recent share price gains.
Saudi Arabia’s stock benchmark Tadawul All Share Index fell 0.2 percent to close at 7,767.33 points for a first session in five, slipping from Monday’s 42-month high - trimming its 2012 gains to 21 percent.
Zain Saudi dropped 5.1 percent. The indebted telecoms operator’s shares have gained 67 percent since late January, when it received approval to extend a SR9.75 billion ($2.6 billion) Islamic financing facility for an additional six months.
Analysts said the largest Arab bourse could rally further, with turnover reaching five-year highs in recent weeks and the economy of the top oil exporter forecast to grow 4 percent this year.
"Saudi’s rally was long overdue," said Mohammed Yasin, an Abu Dhabi-based capital markets specialist.
"Liquidity has come back in, partly because of expectations the market will open up to direct foreign share ownership. The Saudi market is 80 percent retail, but foreigners trading through swaps contracts have added to that.
"Some hedge funds like the Saudi market because of the high volumes."
Such expectations may leave the bourse prone to a sharp correction and a drop in liquidity if market reforms fail to happen, Yasin said, but for now sentiment remains bullish.
"The market is rising slowly, but surely and it looks like it will be the top performer in the Gulf this year," he said.
Saudi Arabia has yet to finalize a timeframe for when it will open up the stock market for direct foreign ownership, the bourse’s chief executive said in December.
In Dubai, the index fell for a second day, dropping 0.2 percent to take its losses to 5.8 percent at to 1,652 points since March 5’s 16-month high.
Elsewhere, Abu Dhabi index eased 0.1 percent to 2,575 points. Qatar benchmark climbed 0.5 percent to 8,773 points.
Kuwait measure fell 0.4 percent to 6,187 points. Bahrain measure slipped 0.2 percent to 1,152 points.
Oman index declined 0.5 percent to 5,795 points.
Egypt measure rose 1.6 percent to 4,985 points.
"UAE markets are consolidating, which happens around earnings season," said Yasin. "As the frequency of company’s annual meetings increased this month, the market slowed down.
"The speculators that were trading the market are now largely out, because they’ve either already taken their positions and are waiting to collect dividends or they’ve made their money and have exited the market."
UAE markets are likely to trade sideways for the time being, with many investors looking for an indication of likely first-quarter earnings before committing more money to shares, he said. "Liquidity has abated, at least in the short term."
Egypt’s main index rose 1.6 percent, rebounding from the previous day’s six-week low.
"The market got hit this week, but foreigners were buyers and retail investors are taking that as an indication for the short term, and that’s turned sentiment positive," said one Cairo equity trader.
Foreign portfolio investors fled Egypt after last year’s popular uprising. A few have bought into equities this year as the market rallied 39 percent from December’s three-year low, but traders said foreigners were still waiting for more political stability before returning in greater numbers.
Investment bank EFG-Hermes was the top trader as it climbed 2.8 percent, rallying for a second day since saying it was in talks to merge some of its operations with Qatari Islamic investment bank QInvest. – SG/Reuters