MIDEAST STOCKS-Egypt dips, remains resilient despite turmoil
DUBAI Feb 11 (Reuters) - Egypt's benchmark index fell in thin trading on Monday but the Cairo bourse's resilience in the wake of prolonged political turmoil suggests the prospect of further unrest is already priced into stocks.
Other Gulf markets were mixed, with Dubai in slight retreat, neighbouring Abu Dhabi at a 34-month high and Saudi Arabia up.
Egypt's index fell 0.3 percent to 5,694 points, trimming year-to-date gains to 4.2 percent. Less than 62 million shares traded, a February low.
"There is a lack of strong selling pressure as the market declines," said Saleh Nasser of Pharos Holding in Cairo.
"This should be viewed as a positive signal. Nonetheless, there is still weakness in the market as bulls are unable to push the market through important resistance at 5,900-6,000."
Egypt's new Islamist rulers are contending with a rise in militant activity and also struggling to contain street protests that have sometimes turned deadly.
"Under normal circumstances, we should have seen this market falling sharply because of the uncertainty about the future of the country," adds Nasser. "So the ability to maintain at current levels can be viewed as if the market already discounted all of these bad events."
In Saudi Arabia, the share index rose 0.3 percent, trading within a 125-point range for the past four weeks.
The measure has lagged other Gulf markets over that period because of disappointing quarterly earnings from banks and petrochemicals, the kingdom's two main sectors, according to Hesham Tuffaha, a Riyadh-based fund manager.
"Investors are willing to take on risk and trade the mid- and small-cap stocks, but are keeping away from the bluechips," said Tuffaha.
He said valuations were low relative to historical norms, predicting the Saudi bourse would again pick up by late February in a catch-up play with other Gulf and global markets.
"As other markets rally, Saudi becomes more attractive in terms of valuations," said Tuffaha. "You can get dividend yields of about 6 percent and that will bring investors back to the Saudi market."
In December, Saudi announced a record budget for 2013, but doubts remain over whether the planned spending hike will translate into higher corporate profits.
"People are over-estimating the amount of money the Saudi government will spend and the impact of this," said a Dubai-based senior trader who spoke on condition of anonymity.
He distinguished between government spending to boost consumption - putting more money in regular Saudis' pockets - and capital spending that would increase industrial output.
"More money is going on consumption spending and that doesn't translate into anything like the earnings per share growth (EPS) that people had hoped for," said the trader.
"The market doesn't like EPS growth based on volume expansion, but on pricing power."
The Saudi banking index climbed 0.5 percent, trimming its losses since Jan. 12's four-month high to 3 percent.
* The index fell 0.1 percent to 1,897 points.
* The index rose 1 percent to 2,924 points.
* The index climbed 0.4 percent to 6,321 points.
* The index rose 0.3 percent to 7,031 points.
* The index fell 0.3 percent to 5,694 points.
* The index rose 0.06 percent to 8,776 points.
The index fell 0.1 percent to 5,856 points.
* The index slipped 0.04 percent to 1,086 points.
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