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ME markets edge up as Yemen air strikes end

DUBAI, April 22, 2015

Most major stock markets in the Middle East rose modestly on Wednesday after Saudi Arabia and its allies in the region decided to end a campaign of air strikes against Yemen's Houthi rebels.

Riyadh announced late on Tuesday that it was ending a month-long offensive against the Houthis, who seized large areas of Yemen, and said it would back a political solution to bring peace to its war-ravaged neighbour.

The Yemen fighting was never a big concern for financial markets, which believed the Gulf states could prevent the conflict from spreading beyond Yemen's borders; bond yields and credit default swaps barely moved in response to the violence.

Nevertheless, the fighting did unsettle some retail investors in the Gulf and Egypt, and stock markets across the region fell by several per cent in the days after the military campaign began.

Saudi Arabia's index inched up 0.1 per cent on Wednesday to 9,572 points, although it closed well off its intra-day highs, struggling for a fourth day in a row to break through major technical resistance in the 9,572-9,745 point area, where the 200-day average roughly coincides with the March peak.

Telecommunications operator Zain Saudi surged 4.8 per cent after announcing its first-quarter loss had narrowed to 257 million riyals ($68.5 million) from 318 million riyals a year earlier. Two analysts surveyed by Reuters had forecast losses of 270.1 million and 289.4 million riyals.

Blue-chip petrochemical firm Saudi Basic Industries rose 0.9 per cent and property developer Jabal Omar , another main support for the benchmark, climbed 1.1 per cent.

But telecommunications operator Mobily, which posted a surprise first-quarter loss on Tuesday and tumbled 6.8 per cent on that day, retreated 2.2 per cent further.

A number of other stocks also declined on profit-taking after rising sharply this week on news that the kingdom would open the market to direct foreign investment from June 15.

Dubai's index climbed 0.3 per cent to 4,133 points as most stocks gained. Property developer DAMAC initially surged after saying it would pay at least 25 per cent of its capital in cash dividends in 2015 and the same ratio in 2016. But it closed only 0.3 per cent higher.

The company, which only offered a 10 per cent bonus share issue for 2014, also reported a 38 per cent fall in first-quarter net profit because of a large one-off gain a year earlier. It later clarified that the profit of its property unit, DAMAC Real Estate Development Ltd, rose 3 per cent in the same period.

Another real estate firm, Union Properties, jumped 3.5 per cent to 1.50 dirhams, a five-month closing high. The stock has attracted increasing volumes after breaking this week through technical resistance at 1.34-1.35 dirhams, its peaks in late December and January.

Dubai's benchmark is approaching major chart resistance on its 200-day average, now at 4,259 points. It has not traded above that level on a sustained basis since last October.

Abu Dhabi's index rose 0.6 per cent and First Gulf Bank (FGB) was the main support, jumping 2.3 per cent ahead of an earnings announcement and after its competitor Abu Dhabi Commercial Bank beat estimates with a 31 per cent increase in first-quarter net profit.

But FGB's first-quarter profit, announced after the close, was 1.42 billion dirhams ($386.7 million), falling short of analysts' average forecast of 1.51 billion dirhams.

Qatar's bourse inched up 0.1 per cent as Qatar Electricity and Water Co, the country's monopoly utility, jumped 3.6 per cent.

The firm reported a 15.7 per cent rise in first-quarter net profit to 346 million riyals ($95.1 million). Two analysts polled by Reuters had forecast QEWC would make a profit of 303.8 million and 308.8 million riyals.

Egypt's index climbed 0.6 per cent, after declining for five sessions in a row. Cairo had joined the Saudi-led coalition against Yemen's Houthis so the end of the air strikes was also positive for the Egyptian market, said Harshjit Oza, an analyst at Cairo-based Naeem brokerage.

But the market may remain soft until the release of first-quarter earnings, which are due by mid-May, he added. One negative factor is the adoption early this month of bylaws covering new taxes on capital gains and dividends which, according to some market players, are making Cairo less appealing to investors compared with other bourses in the region.

"That's a concern and we can see that in the volumes," Oza said.

Several Egyptian media, including the Youm Al Sabeh newspaper, on Tuesday quoted Egyptian stock exchange chairman Mohammed Omran as saying that he himself did not understand some of the new regulations because of their complexity.-Reuters




Tags: yemen | markets | Mideast | Air strikes |

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