x Abu Dhabi, UAETuesday 23 January 2018

Tadawul rises as protests are muted

A positive open for Saudi Arabia's Tadawul is likely to offer a fillip to regional markets this week

A sharp rise in Saudi Arabia's stock market yesterday came as relief to investors across the region as protests planned for the kingdom did not materialise.

Investors feared that demonstrations expected a day earlier in Riyadh could lead to further instability in the Mena region, but those concerns faded when hundreds of police prevented them.

Saudi Arabia's Tadawul, the Arab world's largest and most liquid exchange, often dictates the direction of its smaller peers.

Its Tadawul All-Share Index rose 3.08 per cent to close at 6,297.01 yesterday, paring losses from the past two weeks.

The index rose about 15 per cent last week, reversing a 13-session retreat during which it lost 20 per cent on investor fears that regional unrest would spread to the kingdom.

A stock market rout across the Gulf ended last week as investors snapped up cheap stocks that had been driven lower on fears of regional unrest.

Last week, Qatar's QE Index jumped 8.3 per cent to 8,228.87, even though it was closed one day for a national holiday.

For the week, the Dubai Financial Market General Index rose 4.4 per cent to 1,449.98, the Abu Dhabi Securities Exchange General Index advanced 2.3 per cent to 2,617.13, and the Bahraini measure advanced 1.09 per cent to 1,410.98.

Kuwait's measure rose 1.56 per cent last week to 6,286.60, and Muscat's index fell 1.08 per cent to 6,334.72.

Amid the general market upturn, some industry experts say not all bargain stocks represent good value.

"If you look at the market price to earnings it looks very attractive, but you have take into account risks involved with the companies," said Sven Richter, the head of frontier markets at Renaissance Asset Managers.

"Companies that have less debt and started to look interesting tend to not be as cheap as some of the others." Mr Richter added that while stocks in Dubai were at all-time lows, they were not as attractive and cheap as in Saudi Arabia, where consumer-related companies have been perceived as particularly good value for money.

The Saudi and Dubai exchanges have been in the spotlight for investors eager to take advantage of stocks trading at below their average value.

Emirates NBD, the UAE's biggest bank by assets, fetches Dh3.20 even after the company said last month its book value was about Dh6.06 a share.

Emaar Properties, the builder of the world's tallest tower, closed at Dh2.68 on Thursday, or 50 per cent below the company's reported book value of Dh5.10 a share.

Banking stocks are also likely to be in focus this week, as Dubai Islamic Bank (DIB) yesterday reported a 33 per cent drop in net profit for last year, compared with 2009.

An increase in provisioning contributed to the lender's second consecutive year of net profit decline.

DIB, the country's largest Islamic bank, set aside an additional Dh864 million for bad loans during the year, it said.

The EGX 100, Cairo's benchmark index, was expected to reopen before March 28 to avoid being removed from global indexes, Reuters reported yesterday, quoting a statement by the finance minister on the prime minister's Facebook page.

Egypt's stock exchange has been closed for nearly six weeks since the index fell sharply in the days before demonstrations ousted Hosni Mubarak from the country's presidency. The Egyptian Exchange is part of the MSCI Emerging Markets Index, which is tracked globally by thousands of fund managers investing in the Mena region.

"There is momentum now to get it open," said Khaled Masri, the head of brokerage at Rasmala Investment Bank.

The MSCI will remove Egypt from its listing if the stock market remains closed for more than 40 business days.

"It's going to be messy and going to be ugly … [but the market] will most probably open soon because on an operational and technical side they are ready," Mr Masri said.

Last week, Tunisia's market opened after a week-long suspension, the second in two months. It ended the week 0.3 per cent higher at 4,380.53, after a sharp rise on the first day of trading.

"Many investors will wait until first-quarter results to get a better picture about the impact of the Tunisian revolution and the impact of the Libyan civil war on the Tunisian economy and on the activity of these companies," said Youssef Lahlou, a portfolio manager at Silk Invest in London who covers Tunisia.